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Statement on Fundamental Reform of the Money Lending Business System


A bill to amend the Regulatory Law for the Money Lending Business cleared the Lower House and was unanimously adopted by the Upper House today. It radically reforms the money lending business system which needed urgent reform to solve problems of borrowers taking on multiple loans.


The new law drastically revises the Regulatory Law for the Money Lending Business enacted in 1983, reinforces standards for new companies trying to enter the business by raising asset requirements, tightens up regulations over misconduct, prohibits excessive lending that requires more than one-third of a borrower's income and especially enhances the interest rate regulations.


In regard to interest rates, all requests of the Japan Federation of Bar Associations (JFBA) were included in the revision. They were that interest rates in the gray zone for which repayment is regarded as being valid as stipulated in Article 43 will be abolished within three years, the ceiling on interest rates provided by the Law for Control of Acceptance of Contributions, Money Deposit and Interest, Etc. will be lowered to 20% from 29.2%, the exceptional interest rate for daily loan lenders will be abolished and regulations on deposits will be established. The JFBA with a broad range of civil organizations strongly pushed forward the measure to lower the ceiling on interest rates from the standpoint of prevention of and relief from multiple debts. The JFBA highly appreciates that this revision will help prevent borrowers from falling prey to new multiple loans.


In addition, supplementary provisions stipulate that it is the state's responsibility to undertake measures to solve problems of multiple debts and a headquarters for measures to address multiple loans to borrowers is going to be set up in the Cabinet Secretariat within this year.


Twenty-one people a day commit suicide due to living and economic difficulties, and the government should immediately take necessary measures to reduce the number of borrowers with multiple loans which is over two million.  The JFBA urges the government through the above mentioned headquarters and by cooperating with local governments to improve counseling services for overextended borrowers, enhance the loan system to provide for a safety net against unqualified borrowing, and undertake measures against loan sharks. The JFBA itself will also make every effort to help solve the problems of multiple debts.


Seigoh Hirayama
Japan Federation of Bar Associations
December 13, 2006

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