The recent automated teller machine card frauds exposed the weakness in risk control management among banks in the nation, but more problems will occur over cash-advance cards if the issuance of such cards is not improved, industry experts warned yesterday.
"The poor risk-control management in banks has damaged consumers' interests, and banks will eat their own bitter fruit if they fail to strengthen security mechanisms," Cheng Jen-hung (程仁宏), secretary-general of the Consumers' Foundation (消基會), said yesterday.
Glut of credit
As of March, there were 26 banks issuing 2.41 million cash-advance cards in Taiwan with total outstanding loans of NT$91.5 billion, according to the Bureau of Monetary Affairs' latest statistics.
The cash-advance cards allow cardholders to borrow small amounts of money at annual interest rates of up to a 18.25 percent in addition to handling fees.
Cardholders don't have to provide collateral or guarantees, nor pay application fees, credit insurance fees or annual fees when applying for the card.
It is this simple application process that creates problems. The loose card-issuing process and oversight are a product of the fierce competition among the nation's banks.
For example, one bank promises that it can issue the cards within 30 minutes, which a financial expert said is not enough time to conduct a thorough credit investigation.
Because of such lax practices, First Commercial Bank (
Other problems emerged when banks found that some cards were issued based on fake or stolen IDs and documents.
The abuse of the cash-advance cards by young users also forced the ministry in March to demand that students be allowed to hold only one card with a maximum credit line of NT$20,000. The ministry said this safeguard was to compensate for the students' immature financial management skills.
Cosmos Bank (萬泰銀行), which leads the market with 1.2 million holders of its "George & Mary" cash-advance card, said it has confidence in its risk-control management practices.
"We have meticulous card-issuing procedures, and the amount of bad loans in the sector is within our control," said company spokesperson Shih Kun-liang (施坤良).
If a valid ID and related financial statements are presented when applying for the card, it will take only 30 minutes to process the application, Shih said.
Another cash-advance card issuer, Union Bank of Taiwan (聯邦銀行), said it usually takes three days to complete the issuing process.
"I think compared to other competitors, we have more stringent measures in place to monitor the service," said Lin Mei-lan (
However, risk derived from bad loans is still high, which led Macoto Bank (
Oversight needed
"I think there should be laws to regulate this sector to explicitly stipulate the obligation of banks and consumers," Cheng of the Consumers Foundation said.
Chiang Yeong-yuh (
"If proper measures are not implemented, financial crises like the recent ATM card frauds will happen again," Chiang said.
Chiang said enforcement of risk-control management should be included in the law, but according to Bureau of Monetary Affairs, there are no specific laws to regulate cash-advance cards as the business is classified as a "consumer banking product."
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