Korea Financial Investment Association Establishes Standard Terms for Credit Card Corporate Members' Annual Fees
Specifies No Waiver for First Year Annual Fee
Limits Excessive Economic Benefits for Corporate Members
[Asia Economy Reporter Ki Ha-young] From next year, an annual fee will be mandatory for newly issued corporate cards. Attention is focused on whether the excessive marketing practices toward corporate members, which have been criticized so far, will decrease.
According to the industry on the 20th, the Credit Finance Association recently established the "Standard Terms and Conditions on Annual Fee Imposition for Corporate Credit Card Members." Until now, corporate card annual fees have been applied based on individual terms and conditions operated independently by card companies without a separate standard agreement.
With the establishment of these standard terms, from January next year, newly issued corporate cards will be charged an annual fee on a one-year basis from the time of card issuance, the same as personal cards, and payment is required. It is explicitly stated that the annual fee for the first year of corporate card issuance cannot be waived. However, exceptions are provided for cases where other laws prohibit annual fees, when the card company’s exemption conditions are met upon renewal issuance, or when cards are uniformly replaced, substituted, or newly issued due to corporate division, merger, or change of corporate name. Additionally, exemptions are allowed when cards are issued to national, local governments, or public institutions, or when cards are issued to members for public projects, and only for corporate purchase-only cards.
A new provision on annual fee refunds has also been introduced. Card companies must refund a certain amount of the annual fee within ten days upon termination of the corporate card contract. The refund amount is calculated on a pro-rata basis from the date of contract termination. However, if there are unavoidable reasons such as identifying the details of additional services provided for calculating the refund amount, the refund can be made within up to three months.
This establishment of standard terms is a follow-up measure to the "Plan to Enhance Card Industry Competitiveness and Improve High-Cost Business Structures" announced last year. It was prepared to restrict excessive economic benefits provided to corporate members. Card companies have been criticized for excessive loss-leading marketing, such as paying corporate welfare funds to client companies or covering employees’ overseas travel expenses to attract corporate card members who make large payments.
Furthermore, in July, financial authorities prepared partial amendments to the Enforcement Decree and Supervisory Regulations of the Specialized Credit Finance Business Act, limiting the economic benefits given by card companies to corporate members to no more than 0.5% of card usage amounts. Benefits provided by card companies to corporate card members, such as fund contributions, cashback payments, support for training and events, and maintenance and repair of IT systems, are defined as economic benefits.
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