Consumer Loan Interest is Too Low!

*Hiragana Times CIA(Cynically Insulting Agency)

A consumer loan institution reform plan is now being discussed in the Diet. This plan proposes the lowering of interest rates charged by moneylenders, however, some tricks can be observed behind the scenes. Hiragana Times CIA conducted an emergency interview with KANEDA Shoji, author of “Tricks of Consumer Loans” and president of Heavy Debtor Rescue Association.

CIA: Why is this reform taking place?

President: The situation behind this reform is the recent harsh collecting of loans by leading consumer loan companies. A practice that also came into the spotlight was one in which these companies tied up with insurance companies and let their debtors take out contract with them, and then collect the loan money when the debtors die. Actually, the suicide rate of debtors has increased.

CIA: But, the plan to lower the annual 29.2% interest ceiling based on investment law to 15 ~ 20 % is good, isn’t it?

Pre.: No, not at all. The interest rate has to be raised. It should be at least 300% .

CIA: Wait a minute! You are on consumers’ side, aren’t you?

Pre.: Listen! The situation of those who have to borrow 100,000 yen with a high rate of interest will be equivalent to that where ordinary people have a debt of one million yen. Actually, it will be almost impossible to pay back. If the interest is rate raised to 300%, the interest alone will be 300,000 yen, nobody will borrow and hence no more heavy debt victims will be created.

CIA: I see. By the way, why has the number of consumer loan companies been increasing?

Pre.: Until the mid 90s, banks lent 20 trillion yen to individuals, but the lending amount has since dropped to 8 trillion yen. On the other hand, housing loans that require a mortgage have increased from 66 trillion yen to 114 trillion yen. In short, banks have become hesitant to loan to individuals who don’t have mortgages. On the other hand, during that period the amount of consumer loans swelled from 4 trillion yen to 12 trillion yen. Now, it is not the banks that individuals borrow money from, it is consumer loan companies which charge much higher rates of interest.

CIA: There are big differences in interest rates between banks and consumer loan companies, aren’t there?

Pre.: The difference is 5 ~ 10 times. If the low interest banks loan to consumers, the tragedy of heavy debtors will decrease greatly. Surprisingly, banks lend 4 trillion yen to consumer loan companies at an interest rate of only 1.7 ~ 3.8%. Furthermore, banks have purchased a huge amount of their debentures. So the banks are supporting the majority of their funds behind the scene.

CIA: When the bubble economy burst and many banks were faced with possible bankruptcy, the government loaned money to the banks at almost no interest, didn’t it? Well then, that means that our tax money was used to support consumer loan companies that are, ironically, very tough on non-paying customers, doesn’t it?

Pre.: That is not all. Many Finance Ministry bureaucrats who are in the position to monitor the industry are taking advantage of Amakudari to join consumer loan companies. Some politicians ask consumer loan companies to purchase expensive tickets to their campaign parties, and they supported them by saying, “If interest rates are reduced, bank lending criteria will become harsher and many people will not be able to borrow.” To satisfy politicians, let’s dare them to raise interest rates all the way up to 300%.

Comment from CIA
Many artistic masterpieces about moneylenders have been produced including SHAKESPEARE’s “Merchant of Venice” and DOSTOEVSKY’s “Crime and Punishment.” Did you know that in Japan there was a best-selling book published a few years ago called “Never pay back the money you borrowed!”?

*Hiragana Times CIA(Cynically Insulting Agency)

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