The Supreme Court has made a ruling helpful to those who have borrowed money from consumer and "shoko" (industry and commerce) loan firms -- which lend operating funds to small companies -- as well as from illegal loan sharks. The ruling will affect the practice of having borrowers pay interest rates above the level allowed by law if they "voluntarily" agree to do so.
This strange practice has been possible because two laws set different maximum interest rates for money lenders. The Law Concerning the Regulation of Interest sets maximum annual interest rates at 15 to 20 percent, depending on the size of loans. But it does not stipulate criminal punishment for violators. On the other hand, the Law Concerning the Regulation of Receiving Capital Subscriptions, which does provide for criminal punishment, caps annual interest rates at 29.2 percent.
The two different laws create a gray zone. An interest rate above the level set by the interest regulation law can be applied as long as it is below the level set by the capital subscription law. A third law, the Law Concerning Restrictions on Money Lending, allows money-lending firms to charge an interest rate in the gray zone if certain conditions are met, including the borrower's "voluntary" consent to pay it. Therefore it has been almost customary for consumer and shoko loan firms to charge gray-zone interest rates.