A Financial Services Agency panel reached a broad agreement Tuesday to recommend that the “gray zone” that allows for a higher ceiling on consumer loan interest rates be removed to help reduce the rising number of personal bankruptcies, FSA officials said.

Most of the members on the advisory panel agreed that the 29.2 percent ceiling under the Investment Deposit and Interest Rate Law should be repealed to leave only the 15 percent to 20 percent maximum range set under the Interest Rate Restriction Law.

In principle, consumer finance credit card companies are required to charge interest within the 15 percent to 20 percent range. However, they can extend the lending rate up to the 29.2 percent maximum if a borrower agrees in writing to pay the higher rate. A firm can be criminally charged if it applies a rate above 29.2 percent.

Many lenders are believed to charge gray-zone interest rates without borrowers’ consent.

The Supreme Court in a landmark decision in January sent a case back to the Hiroshima District Court for further deliberation, saying a business owner had been charged too much at 29 percent interest by a finance company, which had filed the lawsuit after the borrower had defaulted on the loan. The top court ruled the interest rate should be limited to the 15 percent to 20 percent range.

The committee members also called for toughening regulations on consumer loan firms. This decision comes after the FSA last week gave consumer lender Aiful Corp. a network suspension order for illegal lending and collection practices.

The panel will present its interim report Friday and a final one in June, the FSA officials said, after which the ruling coalition will consider the recommendations.

In a related development, Financial Services Minister Kaoru Yosano said the FSA will begin talks with the Justice Ministry later this week on how to deal with consumer finance companies and other lenders that charge gray-zone interest rates.

Yosano indicated the FSA will consider measures to “gradually correct” the system by getting rid of the 29.2 percent maximum.

He said he will consider the FSA panel’s recommendations and opinions of the ruling Liberal Democratic Party.

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