Masazumi Gotoda, parliamentary secretary in charge of financial services, said he resigned Wednesday to protest a draft bill to lower the ceiling on consumer loan interest charges because it would allow lenders to continue to charge up to 28 percent for nine years after the bill is passed.
“I cannot accept a loophole in which a high ceiling will be left for a long time,” Gotoda said at a news conference after his resignation was accepted by Financial Services Minister Kaoru Yosano.
“I cannot understand why the Financial Services Agency has to compile a draft that makes such a compromise,” he said.
The government is expected to leave the post vacant for a while, government sources said. Gotoda, a Liberal Democratic Party lawmaker, retains his position as parliamentary secretary in charge of economic and fiscal policy.
Gotoda’s announcement came as the FSA and the Justice Ministry published the draft bill Tuesday. It will eventually create a single cap on consumer loan interest rates and lower it.
The LDP has already begun discussions on the bill. However, with the resignation of Gotoda, who had taken the lead in the talks, it is unclear whether the ruling party will be able to submit the bill to the Diet as planned during an extraordinary session starting in late September.
Consumer loan companies are required to charge no more than 15 percent to 20 percent, depending on the size of the loan, under the Interest Rate Restrictions Law. But under the Investment Deposit and Interest Rate Law they are allowed to charge as much as 29.2 percent if borrowers agree in writing.
The draft aims to unify the ceilings at 20 percent, three years after the legal revisions are made.
For individual borrowers, however, the draft envisions a higher ceiling of 28 percent applicable for up to five years on one-year loans of up to 500,000 yen, and on six-month loans of up to 300,000 yen.
The lower ceiling is expected to take effect a year after the bill is enacted by the Diet, but the higher rate on small loans would remain in place for another three years.
This means the maximum interest charge of 28 percent could remain for up to nine years, observers said.
For corporate borrowers, the draft permits larger loans at the higher rate.
The lending rate loans of up to 28 percent for businesses will apply to loans worth up to 5 million yen that are repayable within three months, according to the draft.
Gotoda lashed out at the draft, saying, “It ignores concerns shared by members of an FSA advisory panel and the figure (of 28 percent) is groundless.”
A Lower House member from Tokushima Prefecture, Gotoda assumed the secretarial post in 2005. He is serving his third term.
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