Nearly a decade after the credit card market meltdown in 2002-2003, Korea’s financial regulator (FSS) is again concerned about rising risks in the credit card industry and warns that it will hand down stern disciplinary measures against irregular practices to attract customers.
The nation’s chief financial regulator on Monday expressed his strong resolve to tighten supervision of credit card issuers, warning their excessive competition could bring the industry to a new crisis.
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.
Regulators in Asia tend to play a more active role and prefer preemptive rather than reactive actions, largely due to lessons learned from the financial crisis from late 1990s to early 2000s. In some other Asian markets, such as China, overall markets risks for credit card issuers have been on the rise over the past two years as card borrowing quickly expands and delinquency rates rise.
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