Lending industry group to urge stronger measures against excessive debts

August 21, 2017

TOKYO- Japan's nonbank lending industry group will urge consumer lenders guaranteeing unsecured loans on bank cards to strengthen measures to prevent clients from struggling with excessive debts, Jiji Press learned on Monday.

The move by the Japan Financial Services Association comes amid concerns about an increasing number of people with multiple debts.

The consumer lenders will be urged to strengthen checks on the purpose of borrowing before deciding whether to give loan guarantees, and to improve consulting services for low-income earners.

Banks usually have card-loan guarantee contracts with consumer finance firms, relying on their know-how about retail lending operations.

Under the contracts, banks pay guarantee fees to consumer lenders, which would repay card loans on behalf of borrowers while working to collect money from them, if they fall into arrears.

Loans on bank cards are not subject to the loan ceiling of a third of annual income under the country's money lending business law.

In March, the Japanese Bankers Association called on member banks to get accurate information on loan applicants' incomes. Major banks, in response, have decided to require applicants to submit income certificates for loans of over 500,000 yen, compared with those of over 2 million to 3 million yen previously.

As some banks are slow to take such a step, the lending industry group will call on them through their loan guarantee firms to introduce stricter standards on the submission of income certificates.

According to the Bank of Japan, the outstanding amount of bank card loans came to 5,679.3 billion yen at the end of June, hitting the highest level in 19 years. Jiji Press