Press Conference by Kaoru Yosano, Minister of State for Economic and Fiscal Policy and Financial Services

(Excerpt)

August 15, 2006

Q.

In regards to the revision of the interest rate cap under the Moneylending Control Law, some news articles today reported that the Financial Services Agency (FSA) had starting looking into making an exception for short-term loans in small amounts. What are your thoughts on this?

A.

Some members of the Liberal Democratic Party (LDP) are suggesting that short-term loans in small amounts be treated as exceptions. One of the problems is how to define ''small amount'' and ''short-term''.

Another problem is that if a person borrows money from more than one moneylender, it will give rise to multiple debts. There is also the question of whether it is possible to technically prevent people from borrowing money from more than one moneylender. A massive system might be needed.

Furthermore, opinions are divided over the issue of whether such exceptional treatment should be implemented as a permanent measure, or whether exceptions should be allowed as a provisional, interim measure in consideration of radical changes. Our plan is to compile a summary of various approaches to this issue by the end of this month and pass it on to the LDP, so that it can be discussed within the LDP as well. The FSA has not reached any conclusion yet.

Q.

There were some reports in the press this morning that the FSA had launched a fact-finding inquiry into leading consumer credit companies and other institutions that are suspected of making customers take out life insurance and failing to fulfill their obligation to provide a proper explanation to customers. Please confirm whether these reports are true or not, and explain how the FSA itself will deal with the matter.

A.

Loans often come with life insurance: for example, if you decided to take out a long-term, thirty-year housing loan, the bank will ask you to sign a life insurance contract. In many cases like this, however, the life insurance premium is borne by the bank. Under such life insurance contract, the beneficiary is the lending bank and it is by no means unnatural. The borrower taking out such life insurance is good for the borrower's family, as it gives them a sense of security in the long run.

However, a wide range of problems actually exist, such as the borrower not being notified about the fact that a contract has been concluded, and even if the borrower has been notified, he/she is not informed of the terms and conditions of the contract, or the payer of the insurance premium is not clarified. In that sense, it is conceivable that life insurance itself is taken out, but it is extremely important that the terms and conditions are notified and declarations to customers are made in a strict manner.

(End)

Site Map

top of page