South Korean credit cardholders face a use-it-or-lose-it proposition under a proposal designed to scale back the country’s debt problems.
Under the plan announced late last month by the country’s two top financial watchdogs–the Financial Services Commission and the Financial Supervisory Service–card issuers starting later this quarter would have to ask customers who have not used their cards for more than one year whether they want to keep them. They must make the requests through email or by phone.
The plan still needs lawmaker approval, which is likely.
Issuers failing to comply with customers’ wishes to cancel their cards would face fines. They also must suspend the dormant cards of customers who do not reply to their inquiries and cancel them three months later.
The plan also would ban credit card companies from conducting marketing activities, such as offering bonus mileage points for card purchases.
Moreover, the two financial watchdogs would regulate how issuers decide credit card limits to control mounting household debts caused by reckless use of plastic. Card companies would have to define the credit limit when a client first signs up for a card and set the limit by taking into account repayment capacity, credit rating and credit history.
Issuers also would be banned from changing the terms and conditions of service, such as interest rates, late-payment fees or additional benefits, during the first year it issues a card. Once that deadline expires, they would have to inform cardholders of any changes six months before they become effective.
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