The nation’s biggest credit card firms are expected to receive regulatory punishment for unauthorized sales activities.

The Financial Supervisory Service has uncovered about 20,000 irregular cases including reckless issuance of credit cards.

Since May, the regulatory agency has been probing six major credit card issuers ― Shinhan, Hyundai, KB Kookmin, Samsung, Lotte and Hana-SK ― in a bid to curb excessive competition.

While most of them are expected to face penalties, the FSS is poised to review its inspection and finalize sanction-levels against rule-violators in two or three months.

“The level of sanctions could vary according to the scale of their irregular issuance,” an FSS official said.

Before handing down sanctions, the regulator plans to instruct the six companies’ respective auditors to closely look into the 20,000 cases.

In the wake of their excessive business expansion mode, the FSS has 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.

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.

Credit card firms saw their combined assets, including insolvent loans, reach 75.6 trillion ($71.5 billion) won at the end of 2010 ― after continuing to expand over the past few years ― approaching the critical level of 78.9 trillion won reached at the end of 2003.

The number of card salespeople also came to about 50,000 as of the end of 2010, up 30 percent from 35,000 a year earlier.

Card issuers have been fighting a marketing war since last year, vying for a bigger slice of consumer spending as it gets on track to recovery.

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 more than 800 trillion won.

Card companies which fail to meet new regulatory standards will face tougher sanctions such as business suspension, FSS officials said.

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