South Korea to Suspend 3 Credit Card Firms Over Data Theft
South Korean regulators will order three consumer finance companies to suspend operations for three months after the nation’s biggest theft of information on credit card holders.
The Financial Services Commission will inform the card units of KB Financial Group Inc. (105560), NH Financial Group Inc. and the Lotte Group of its decision today, FSC Secretary General Koh Seung Beom told reporters in Seoul today. The companies have 10 days to appeal the ruling before the FSC meets on Feb. 14 to confirm the penalty, Koh said.
The theft riled the public and politicians in a country where consumers use plastic for more than half of their spending. President Park Geun Hye on Jan. 27 demanded a thorough investigation, and FSC Chairman Shin Je Yoon apologized Jan. 22. for the breaches, which prompted clients to cancel cards and top executives at the firms to offer to quit.
The card companies will be barred from adding subscribers and marketing insurance policies or travel products from Feb. 17 once penalties are set on Feb. 14, according to the commission. Services to existing clients will continue.
Shares of KB Financial, owner of the nation’s biggest bank, slid 3.8 percent to 35,800 won as of 1:11 p.m. in Seoul and Lotte Shopping Co. (023530), parent of Lotte Card, retreated 2 percent. The benchmark Kospi index lost 1 percent.
In a nation of more than 50 million people, about 2.28 million customers at the three companies have requested cancellation of their cards, while 3.84 million demanded they be reissued, according to Financial Supervisory Service figures as of Feb. 1. A total of 840,000 customers ended services with the companies.
About 20 million card holders at Lotte Card and Nonghyup Bank and 40 million at KB Kookmin Card were affected, the FSS said on Jan. 19. The estimate may include overlaps for multiple card holders or former customers.
The breaches prompted regulators to review all financial firms to examine how they protect customer data. The FSC also asked companies to voluntarily refrain from phone marketing of financial products by March as people are becoming increasingly concerned about information security, the regulator said in a statement on Jan. 26.
Dozens of executives at KB Financial and Lotte Card offered to resign following the data breach. KB Financial accepted Kookmin Card chief Shim Jae Oh’s resignation, it said in an e-mailed statement yesterday.
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