In December 2006 the government revised the law for consumer loans making it more difficult for certain people to borrow cash and reducing the amount of interest moneylenders could charge. Over the past 3½ years the law went into effect in stages, and as a result a number of consumer loan companies went out of business, since many were forced to pay back excessive interest they had charged their customers in the past. The main aim of the law is to curtail the occurrence of spiraling debt spread out among multiple companies.
Last month the last element of the revised law went into effect. From now on, a customer will not be able to borrow more than the equivalent of one-third of his or her annual income, and will have to submit documentation as proof of income. Though the law was conceived to save people from crushing debt, it may effectively drive more people to bankruptcy or to underground loan sharks.
Unfortunately, a lot of people don't seem to know about the law. According to the Mainichi Shimbun, the Financial Services Agency found that less than 50 percent of the people it asked had ever even heard about the new law.