Retailers angry over gov`t move to restrict credit card purchases

A small snack meal restaurant in the Seosomun-dong area of Seoul at noon Wednesday was crowded with office workers who came for lunch. Most patrons who finished their lunch paid with their credit cards.

People who visited the restaurant alone or in groups of two had bills of under 10,000 won (8.61 U.S. dollars), but did not hesitate to pay with plastic money.

The restaurant owner said, “Will patrons understand and accept it if we say we cannot take credit cards for payment of under 10,000 won?” adding angrily, “The government has stepped in to point fingers at business owners."

As financial authorities take action to allow stores to reject credit card payments for purchases of less than 10,000 won, even merchants are expressing discontent en masse. On the bid to revise the law, they questioned if the government “wants to put us in dispute with our patrons.”

The Korea Restaurant Association said, “Our own poll suggested that most restaurant owners are opposed to revision of the law,” adding, “If the government does not change its stance, we will adopt a resolution to urge withdrawal of the revision bill to the Lending Financial Institution Act, which is designed to allow store owners to reject credit cards for making smaller payments, in a protest rally of 10,000 restaurant owners next Tuesday.”

A source at the organization said, “Store owners cannot dare to reject credit card payment for purchases because they could lose patrons to rivals, and inevitably face disputes with customers,” adding, “The move to revise the law is not helpful to store owners at all.”

One restaurateur in Seoul said, “Instead of cutting commission fees for credit card companies, (the government) is needlessly causing an emotional dispute between consumers and merchants.”

Consumers are also opposed to the purported revision to the act. An online signature collection campaign is seeking to support efforts to nullify the revision bill in a Web portal site.”

One Web user cynically said, “(The government) wants to promote credit card use by giving tax deductions for credit card payments, but now seeks to curb credit card use, which is ridiculous.”

Yoon Jae-seong, a 29-year-old office worker, said, “The policy runs counter to the smart era, when people can settle all different transactions with a single credit card.”

Store owners want lower commission fees for credit card payments from 2.7 percent of the purchase amount to 1.5 percent, or the rate charged for purchases at large discount stores. One owner said “Credit card companies earn hundreds of millions of dollars in profit, but never consider the situation of the working class at all.”

The Korea Federation of Retailer Organization, which is staging a signature collection campaign targeting 1 million people to seek lower credit card service fees, said, “As long as the clause on a penalty levied on store for rejecting credit purchases, the worst clause in the Lending Financial Institution Act, remains in effect, credit card companies will enjoy superior stature over shop owners.”

“Unless the credit card commission rate is cut, we will resist by mobilizing all measures, including outdoor rallies and constitutional appeals.”

On this move, credit card companies say that if the amount of a credit card purchase is small, this reduces their profit and can even cause reverse margin. Once fixed costs such as value-added network user fees are deducted from overall credit card commission fees, they said, reverse margin will occur for smaller purchases of less than 10,000 won.

tnf@donga.com