Turf battle brews over lending law

BY TOSHIYA ETORI, THE ASAHI SHIMBUN

Prime Minister Yasuo Fukuda and the Financial Services Agency appear headed for a clash concerning jurisdiction over the Money Lending Control Law.

Fukuda plans to put the planned consumer affairs agency in charge of the law to improve responses to the increasing number of complaints about consumer loan companies, sources said.

The consumer affairs agency, which Fukuda intends to start next fiscal year, would be given the authority to directly inspect, instruct and crack down on illicit moneylenders.

If realized, it would be a rare complete transfer of jurisdiction over a law regulating an industrial sector from one ministry or agency to another, the sources said.

However, the FSA, which currently holds jurisdiction over the law, wants to retain its power.

"Integral supervision over the entire financial system will be indispensable to secure stability because an increasing number of cross-sector financial instruments are being offered, and financial groups are accelerating integration of operations in different sectors," an FSA official said.

Concerns have also been raised about the likelihood of nonbank loans to small-business operators being put under the supervision of the consumer affairs agency, the sources said.

The creation of the consumer affairs agency is one of Fukuda's pet projects in his policy to review administrative systems from a consumer's viewpoint.

During a meeting of the council on the promotion of consumer policies in April, Fukuda singled out transactions of consumer products and financial services as an area that should be supervised by the consumer affairs agency.

Earlier this week, Fukuda approved the Cabinet Secretariat's draft plan to put the Money Lending Control Law and the law regulating sales of financial instruments under the jurisdiction of the consumer affairs agency.

The National Consumer Affairs Center of Japan (NCAC) said it received 124,000 complaints and inquiries about consumer loans in fiscal 2006, accounting for about 11 percent, or the second largest ratio, of all complaints.

A senior official of the Cabinet Secretariat said the consumer affairs agency should be given jurisdiction over the Money Lending Control Law because the legislation is meant primarily for the protection of consumers.

But because of the staunch opposition, there is a possibility that the law will be under the joint jurisdiction of the FSA and the consumer affairs agency, the sources said.

The Diet passed the law in December 2006 in response to worsening problems with heavily indebted consumers.

Under the law, the permissible ceiling on interest rates for consumer loans was lowered from 29.2 percent per annum to 15-20 percent, depending on the size of the principal.

The law, which will be in full force by June 2010, also prohibits moneylenders from extending loans exceeding one-third of a borrower's annual income.(IHT/Asahi: May 17,2008)