• Kyodo News


The ruling Liberal Democratic Party is poised to drop a proposal for a temporarily higher ceiling on consumer loan rates in a bill aimed at lowering interest rate caps, party sources said Tuesday.

The LDP had planned to allow a higher ceiling on small, short-term loans to ensure the continued flow of credit to consumers, but the plan has come under fire from both the opposition camp and the LDP’s coalition partner, New Komeito, for being too easy on moneylenders.

The LDP will also withdraw a proposal to make larger loans subject to higher interest ceilings, a move that also would have favored moneylenders, the sources said.

The ruling party will seek to enact the bill during the current extraordinary Diet session ending Dec. 15, they said.

At present, moneylenders are required to charge a maximum of 15 percent to 20 percent, depending on the amount of the loan, under the Interest Rate Restrictions Law. The ceilings are 15 percent on loans of 1 million yen or more, 18 percent loans of up to 1 million yen, and 20 percent on loans of less than 100,000 yen.

But consumer lenders can charge up to 29.2 percent under the Investment Deposit and Interest Rate Law if borrowers agree in writing.

A sharp rise in the number of heavily indebted consumers paying interest in the “gray zone” of 20 percent to 29.2 percent has prompted moves by the government and lawmakers to lower the rate ceilings.

The higher ceiling of 25.5 percent was proposed as a two-year transitional measure to ease the impact of the lower rate caps on lenders offering credit at gray-zone rates.

The proposal to reclassify loan amounts subject to higher rates under the Interest Rate Restriction Law called for a cap of 15 percent on loans of 5 million yen or more, 18 percent on loans up to 5 million yen and 20 percent loans up to 500,000 yen, five times the amounts subject to higher rates under current law.

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