FSS warns Shinhan, Samsung, Hana-SK, Lotte against reckless expansion


The Financial Supervisory Service has issued a warning against four credit card firms over irregular business practices.

The financial regulator said Wednesday that it has uncovered reckless credit card issuance to consumers of Shinhan Card, Samsung Card, Hana-SK Card and Lotte Card.

“Due to the companies’ negligent screening of consumers’ financial status, they incurred bad loans,” an FSS official said.

He said the companies failed to review payment capability of card appliers on the basis of their income level and delinquency records.

Their lax loan screening, revealed by the regulator, was conducted between January 2010 and March 2011.

Between July and August 2011, the FSS carried out a full-fledged probe into issuance practices of the credit card sector amid their rekindled marketing competition.

This year, the issuers are obliged to conduct tough screenings on applications for new cards, as financial authorities strengthen supervision of the industry.

Some customers could also see monthly payment ceilings on new credit cards slashed sharply compared to the average ceiling on current cards.

As part of policymakers’ efforts to curb snowballing household debt, regulators recently unveiled measures against reckless issuance and the high delinquency rate in the credit card industry.

Regulators recently introduced a system to urge card companies to rigidly assess customers’ income, property and credit standing before issuing cards.

In the wake of their excessive business expansion, financial authorities have obliged them to set their own guidelines, curbing expansion, in three major business sectors ― company assets, issuance of cards and costs for promotion activities.

Companies failing to meet the guidelines ― or which surpass the growth limit at certain times ― will be subject to a special regulatory probe and stern punitive measures.

The FSS is also set to introduce a new regulation on the ratio of total assets to equity capital in the credit card industry.

Under the coming regulation, companies may be banned from issuing corporate bonds far beyond their equity capital.

Card issuers have been fighting a marketing war since last year, vying for a bigger slice of consumer spending.

The competition led to sharp increases in card issuances and service loans, similar to the last industry crisis, in which the then-largest issuer LG Card and several others had to be rescued with creditors’ money.

The trend is risky coming on top of the combined household debt, which has reached a record high of 900 trillion won.

By Kim Yon-se (kys@heraldcorp.com)