Illegal Discount Card Users Are to Be Enrolled as Credit Delinquents

From now on, if individuals who receive an illegal discount with their credit cards are found, they will be recorded as credit delinquents and their financial transactions will be limited.

By this action, it is expected that hundreds of thousands of illegal discount users will be registered as credit delinquents.

The Financial Supervisory Service (FSS) announced on January 25 that “As credit card companies have reduced cash services, illegal card discounts have recently become widespread, which increases the number of insolvent companies and subsequent damages to the customer,” and “The FSS has resolved to stop it completely.”

To that end, the FSS plans to document such users and affiliated stores as ‘finance corruptors’ with the Korea Federation of Banks.

Those finance corruptors will be enrolled as credit delinquents according to the regulations for managing credit information and will remain so for seven years. Moreover, as such records are shared for another five years among financial companies, not only their financial transactions but also various social activities will also be limited for up to twelve years.

A team leader of Non-bank Financial Supervision Department, Jo Seong-mok of the FSS said, “More than half of 3.6 million credit delinquents appeared to have received an illegal discount with their credit cards and a private loan just before becoming credit delinquents.” He also emphasized, “Even though the number of credit delinquents will soar for some time by this measure, if we neglect this illegal action, not only card users and companies but also financial systems will be greatly damaged.”

After consultation with relevant government agencies such as the Ministry of Finance and Economy, the FSS plans expand the punishment for brokers of illegal discount cards to include ‘imprisonment up to three years or fines up to $20 million ($17,000).’

It also asked customers not to be tempted by illegal card discounts, stating, “If you receive an illegal card discount for six months in a row to pay back $4 million worth of card charges, your actual debt will then increase up to $9.25 million.”

Meanwhile, according to the FSS, the National Police Agency uncovered 7,210 people in charge of illegal card discounts from 2001 to 2003, and the National Tax Service exposed 132,228 disguised affiliated stores since 2000.

Due to lukewarm countermeasures of finance control authorities concerned with the social and economic impact of such a substantial increase in credit delinquents, only three stores and 10 users were registered as finance corruptors last year.

Keuk-In Bae bae2150@donga.com