But earnings from charging service fees remain robust: FSS dataThe yearly earnings of credit card firms dropped in 2011 for the first time in three years amid financial regulators’ stricter policy on blocking reckless business expansion.
According to the Financial Supervisory Service, six major credit card issuers saw their combined net profit stay at about 1.3 trillion won ($1.15 billion) in 2011, down 51 percent from 2.7 trillion won a year earlier.
This was the first fall since their net profit fell from 2.6 trillion won in 2007 to 1.6 trillion won in 2008.
The card issuers included Shinhan, BC, Samsung, Hyundai and Hana-SK.
The performance of KB Kookmin Card, the nation’s second-largest issuer, was excluded from the combined figure as it spun off from Kookmin Bank in March 2011.
As card firms have entered excessive business expansion mode, the FSS unveiled updated regulatory instructions including “weekly monitoring” during the first half of last year.
Under the instructions, companies have been obliged to set their own guidelines, curbing expansion in three major business sectors ― company assets, issuance of cards, and costs for promotion activities.
The FSS has monitored their guidelines “every week” and moved to issue a warning against players engaged in irregularities quickly.
The regulator recently introduced a system to urge card companies to rigidly assess customers’ income, property and credit standing before issuing cards.
Under the system, companies have no choice but to lower customers’ payment ceilings.
The regulator is also instructing issuers to suspend usage of credit cards, that remain dormant for more than one year.
Dormant cards with no payment record for more than a year account for 27 percent of credit cards in the local market.
In addition, procedures for closing credit card accounts have been simplified.
Despite the drop in their combined profit, credit card companies reaped robust earnings in the services fee sector last year.
The six credit card firms saw their earnings in service fees charged on retailers and wholesalers increase 4.1 percent, or 300 billion won, in 2011.
Small and mid-sized businesses began expanding their protest against major credit card firms in the latter half of 2011, criticizing the card industry’s lukewarm attitude toward cutting charges.
Last year, tens of thousands of restaurant owners gathered in Olympic Stadium in southeastern Seoul for a much-publicized rally, demanding the rates be slashed further to 1.5 percent.
Though Koreans are not joining the worldwide Occupy Wall Street demonstrations in huge numbers, public anger is palpable over financial firm executives’ hefty salaries and generous dividend payouts.
By Kim Yon-se (
kys@heraldcorp.com)
