FSA revealed a draft of the regulation of money lending practices

Draft of regulation

The Financial Services Agency showed a draft of the regulation concerning the money lending practices along with the revision of the Money Lending Business Law.[1] The regulation will be enforced until November 2009.The draft of the regulation imposes the money lenders to exam their customers whose outstanding remain over JPY 100,000, every three months. .The limitation of money lending is established up to one third of annual income of borrowers except the case where the borrower poses securities or real property out of home mortgaged his debt.[2] At the lending, money lenders have to deliver a written document that state the lump sum amount of capital and interest to be paid by borrowers. In addition, money lenders are obliged to disclose that borrowers have no duty of payment over the interest rate that is stipulated in the Interest Rate Restriction Law.

Balance of loan claims

The balance of loan claims in major 27 money lending companies is JPY 9.5 billion at the end of March 2007. It is JPY 0.7 billion decreasing within a year. The reason is explained that money lenders is tending stricter compared with previous time, therefore the ratio of forming contact decrease from 60% in fiscal 2006 to 43% in fiscal 2006 in major 5 companies.

The accumulate number of lending was 15,910,000 cases, diminishing about 1,000,000 cases compared with previous fiscal year. On the other hand, the lump sum reimbursement was about JPY 533,000,000,000 in fiscal 2006, increasing from about JPY218, 800,000,000 in fiscal 2005.[3]

Suicide caused by poor and needy

The National Police Agency published the number of suicide in fiscal 2006.[4] It was 32, 155, decreasing 397 from previous fiscal year. The number of poor and needy was 3,010 that is secondary following 4,341of health. The figure is a little bit deceasing 3,255 in fiscal 2005.The rapid reduction of balance of loan claims in money lending businesses seems not to reflect the number of suicide caused by poor and needy.

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[1] http://www.asahi.com/business/update/0619/TKY200706190633.html

[2] http://www.yomiuri.co.jp/atmoney/mnews/20070619mh11.htm

[3] http://www.yomiuri.co.jp/atmoney/news/20070619i313.htm

[4] http://www.npa.go.jp/toukei/chiiki8/20070607.pdf

System of law applied only to specified products is gotten rid off?

Expected law reform 

The Specific Commercial Practices Law applies to several type of consumer transaction. Among those, in the doorstep selling, telephone selling and distance selling, the law only limited goods, rights and services. The regulation method has been blamed by consumer advocates, especially Japan Federation of Bar Associations.[1]

In recent process of law reform discussion, the METI seems to decide getting rid off the notorious system. It was reported on June 18, 2007.[2]

If the law reform is realized, the law is applied principally to all goods, rights and services except of some exemption, therefore consumer remedy will be progressing significantly. As exempt products, the METI consider insurance and pharmaceutical products.

Backgrount of law reform

Actual number of the administrative sanctions is only 84 cases in fiscal 2006. On the other hand, the number of consultations to the National Consumer Affairs Center reached about 600,000 cases. Everybody can recognize the METI is impossible to choose and specify the certain product to be applied by the law.Moreover, it is very difficult for the administrative authority to restrict rogue trades that appear one after another. We can commonly encounter the situation where many consumers fell prey to rogue transaction of particular products or services already reached in serious condition and states before the METI decides specify the product applied by the law.The direction of law reform in this time is correct.

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[1] http://www.nichibenren.or.jp/ja/opinion/report/061018_2.html

[2] http://www.yomiuri.co.jp/atmoney/news/20070619it01.htm