SEOUL, Jul. 21 (Korea Bizwire) — South Korean law enforcement agencies have revealed that 108 colleges entered into illicit agreements credit card companies, and received rebates for giving them exclusive rights to processing tuition payments by credit card.
Financial authorities are considering imposing administrative sanctions on the card companies for their improper transactions.
The Southern Gyeonggi Provincial Police Agency revealed on July 20 that five credit card companies and five of their contract managers were indicted without detention on
charges of violating financial regulations.
The police also referred files on the 108 colleges to other relevant government agencies, such as the Ministry of Education and the Financial Supervisory Service.
The credit card companies are alleged to have provided rebates of 1.6 billion won
for tuition payments made by credit cards totaling 200 billion won since April of last year.
It was discovered that the credit card companies decided to repay card fees
of up to 2.25 percent to the colleges in compensation for attracting potential
The special credit financial law forbids card companies from offering
compensation to large-sized affiliated stores for the purpose of protecting
small stores from being charged higher card fees. Those who violate the law can be imprisoned for up to five years and fined a maximum of 30 million won.
Last April, the government expanded the definition of‘large-sized affiliated store’ from a corporation with sales of more than100 billion won to a corporation or an individual with sales exceeding 300million won.
Since only approximately 3 percent of total tuition payments are made using credit cards, under the revised definition,colleges became large-sized affiliated stores in the eyes of the law last April.
The credit card companies and colleges, having made a verbal agreementon card fee rebates, signed a formal contract without mentioning the special arrangement.
Due to the unlawful backdoor deal between the two parties, college students have
suffered from the inconvenience of getting a new credit card in order to pay their tuition fees.
A police official said the colleges were not aware of the law revision that forbids
them from accepting rebates, and there was no evidence of individual misappropriation of the funds.”The list of the involved colleges will be reported to related government agencies such as the Ministry of Education,and a policy revision will make it mandatory for colleges to accept all credit cards for tuition payments,” added the official.
In this case, the administrative penalties financial authorities can apply include such measures as the imposition of penalty surcharges and a ban on recruiting new students.
by Kevin Lee (email@example.com)