What’s New with Specialized Credit Financial Business Act?

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Hi guys! Hope you guys are all doing well with this beautiful weather. By the way, I am wondering whether you are aware of recent financial news. Last March, there has been a revision on “Specialized Credit Financial Business Act”, which is to abolish interest-free installment for credit transaction. In response to this issue, the FSC recently made an announcement on further revision and its purposes are as follows:

– To seek concrete measures to implement the act

– To reinforce consumer protection and create sound operating environment

I’ll explain this new amendment in three categories in terms of its main objective.

1. Enforcement of consumer protection – Firstly, a new standard of refunding annual fee when consumers quit using their credit cards is established. Then, credit card users can receive a ten percent refund of the remaining costs; optional services such as vouchers and the expense of issuing this year’s credit card are deductible. Also, the explanation of loan products doesn’t seem enough to protect the consumers. Thus, sufficient information will be given to the consumers from the first stage in order to facilitate their understanding of some important points such as discount rate or late fee. Arbitrary change of payment date without prior notice is also banned to lessen burden on the credit card holders.

2. Promotion of sound operation of credit card companies – The advertisements of credit companies are regulated by education and management in order to prevent possibility of incomplete sales. Indirect regulation on marketing expense is also introduced with the use of two standards: the rate of expense on marketing and propriety analysis on management of marketing expense. Furthermore, thorough analysis on profitability of credit card products will take place due to different amount of optional services offered before and after the sales.

3. Enhancement of competitiveness through additional business – Those additional works include four projects: offering consulting service using big data such as sales information, allowing the usage of design patent related to the work, providing financial education to the consumers as well as the employees, and carrying out electronic financial transaction. The FSC believes that these additional projects will help credit companies to become more competitive.

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This revised version of Specialized Financial Business Act will be effective from September 23rd after it goes through supervision from the relevant authorities. Though it requires further examination, it is expected to be beneficial for both the credit card holders and the credit companies as well and become a lubricant in credit card industries.

By Seunghye Shin (seunghye312@gmail.com)

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