KFTC (Korea Financial Telecommunications & Clearings Institute) and 11 VAN (Value Added Network) providers filed a class action lawsuit against Lotte Card.
This is the first legal battle between VAN providers and a credit card company that have been working as partners for 10 years. It seems that South Korean Government’s plan to reduce credit card transaction fees has turned allies into enemies.
According to industries, KFTC and 11 VAN providers such as NICE Information & Telecommunication, Daou Data, Smartro, NHN KCP, JTNet, KIS Information & Communication, KSNET, KOVAN, First Data, and Korea Information & Communications filed a class action lawsuit against Lotte Card while claiming that Lotte Card did not pay and cancel data capture fee without any discussion. KFTC and 11 Van providers are asking Lotte Card to pay principal and 6% annual interest until the delivery date of their petition and principal and 15% annual interest until principal is paid in full from the following date of the delivery date.
According to the complaint obtained by The Electronic Times, 11 VAN providers are claiming that Lotte Card has not paid ‘data capture cost’, which had been paid to VAN providers, to reduce financial risks that can stem from South Korean Government’s plan to reduce credit card transaction fees.
They are claiming that Lotte Card notified them about its plan to exclude data capture service from a contract and that Lotte Card is forcing an unfair contract to them. VAN providers generally handle credit card approval transmission and purchasing agency service for credit card companies and receive fees in return. Purchasing agency service includes purchase request (data capture), collection of paper statements, transmission fee of electronic signature, EDI (Electronic Data Interchange) fee, and supply of statement paper.
Data capture creates a breakdown of approved transactions from credit cards and sends the breakdown to a corresponding credit card company. The class action lawsuit is based on a claim that Lotte Card is not paying VAN providers fees for handling data capture task.
“Lotte Card informed VAN providers that it would handle data capture service on its own without any discussion.” said HMP Law that is representing 11 VAN providers. “VAN providers are still performing data capture service for Lotte Card according to their contract.”
HMP Law announced through the petition that Lotte Card informing VAN providers about its plan to cancel data capture service has no effect.
Amount of fees that Lotte Card is not paying to 11 VAN providers is about $2.02 million (2.3 billion KRW).
VAN industry announced that it is looking into additional class action lawsuits as few credit card companies are also not paying appropriate fees to VAN providers. Ultimately, South Korean Government’s plan to reduce credit card transaction fees is forcing most of credit card companies to negotiate with major franchise stores and VAN providers.
“We have no legal responsibility as it is stated within DESC (Data & Electronic Signature Capture) contract that purchase request task can be enforced separately from collection of statement task whenever it is necessary.” said a representative for Lotte Card regarding this issue. “It is not true that we are violating contracts we made with VAN providers.”
Staff Reporter Gil, Jaeshik | osolgil@etnews.com
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