Japan Financial Services Minister Shozaburo Jimi said he opposes a plan by Osaka prefecture to loosen regulations for consumer finance companies, arguing the same rules should be applied throughout the country.
“The lending law should be implemented fairly across the nation,” Jimi said at a press conference in Tokyo today. It would be “inappropriate” to allow Osaka to be exempt from national rules, Jimi said, adding that he wasn’t aware of the details of the plan.
Osaka is seeking authority from the Japanese government to allow it to override national lending rules introduced in June. Japan’s third-biggest prefecture today proposed setting up a consumer-lending zone with looser rules, including a maximum interest rate of 29.2 percent for loans with a one-year duration, it said in a press release today.
Japan’s consumer lenders are cutting jobs and closing branches to cope with tougher lending rules that took effect in Japan last month. The companies are turning away borrowers as they struggle to repay excess interest charged to customers following a 2006 court ruling.
“The positive impact on consumer lenders could be large if they are allowed to move their bases to Osaka and then lend to borrowers around the country using the Internet,” said Takehiro Tsuda, a Tokyo-based analyst at Citigroup Inc.
Lending legislation, which took effect on June 18, caps interest rates at 20 percent and prohibits lending to borrowers with consumer debt equal to a third or more of their annual income. The legislation also requires borrowers to submit income statements to a lender before a loan can be approved to ensure they have the ability to repay the debt.
The companies reversed some of the gains today. Acom fell 4.2 percent to 1,383 yen at the 3 p.m. trading close in Tokyo, while Promise Co., the second-largest consumer lender, declined 4.4 percent. Aiful dropped 8.9 percent.
Osaka is making the proposal on concerns that small businesses and that individuals capable of repaying loans won’t be able to access funds, the prefectural government said today. Under the proposal, lenders could charge interest rates as high as 29.2 percent on loans under 200,000 yen ($2,300).
The plan would also allow borrowers to exceed current borrowing limits. Housewives without out independent income, closed out of the lending market by the current national law, would also be able to borrow up to 500,000 yen, according to today’s statement.