Prohibition of Annual Card Usage Benefits Exceeding 0.5% for Large Corporations

Amendment to the Enforcement Decree of the Specialized Credit Finance Business Act Approved at the Cabinet Meeting
Telephone Consent Allowed for Card Renewal and Replacement Issued Without Transaction Records

[Asia Economy Reporter Jo Gang-wook] From now on, providing benefits exceeding 0.5% of the annual card usage amount to corporate members such as large corporations will be prohibited. In addition, when renewing or reissuing cards with no transaction history, consent procedures via telephone as well as in writing will be allowed.

The Financial Services Commission announced on the 22nd that the amendment to the Enforcement Decree of the Specialized Credit Finance Business Act containing these provisions was approved at the Cabinet meeting.

In this amendment, grounds have been established to limit the economic benefits that card companies can provide to corporate members by considering total revenue, total costs, annual credit card usage amount, and the size of the corporate member, to prevent excessive benefits to corporate members.

Accordingly, for large and medium-sized enterprises, the benefit cap (0.5% of card usage amount) regulation will be applied within the range where total revenue is equal to or greater than total costs. However, for small corporations, which account for about 98% of all corporations, the supervisory regulations delegate the application of relaxed economic benefit restrictions.

The Financial Services Commission expects that the restriction on excessive economic benefits, mainly focused on large and medium-sized enterprises that have received concentrated benefits from card companies, will be reflected as a factor in reducing merchant fees.

According to the Financial Services Commission, as of the end of 2018, the annual fees paid by corporate members to card companies amounted to 14.8 billion KRW, whereas the economic benefits provided by card companies to corporations (such as fund contributions, prepaid card issuance, and promotional agency services) amounted to 416.6 billion KRW, approximately 30 times higher.

Additionally, the channels for consent when renewing or reissuing inactive cards will be diversified. Previously, only written consent was allowed for renewing or reissuing inactive cards, but through this amendment, consent methods will be diversified to include written, electronic documents, and telephone, thereby alleviating consumer inconvenience.

This amendment to the Enforcement Decree of the Specialized Credit Finance Business Act will take effect from the date of promulgation. However, the regulations related to the ‘restriction on economic benefits for corporate members’ are scheduled to be implemented from July next year after going through the procedure of revising supervisory regulations that specify detailed standards for excessive economic benefits.