Press Conference by Yuji Yamamoto, Minister for Financial Services
October 31, 2006
1. Minister's Statement
Today, a bill for Money-Lending Business Control and Regulation Law amendments was approved at a Cabinet Meeting. We believe that, with this step, all possible measures deemed to be effective in providing fundamental solutions to the multiple debt problem should be implemented in a comprehensive fashion, which include applying stricter restrictions on entry into and operation of a moneylending business, introducing a framework designed to ban excessive lending by having credit information agencies know the total loan amount of each borrower, and drastically lowering the interest rate upper limit. I would like to ask lawmakers to start deliberating this bill soon and have it enacted during the current Diet session so that the multiple debt problem will be solved as soon as possible.
Concerning the moneylending business, I would like to ask more about the bill containing a series of amendment proposals that was approved at today's Cabinet meeting; what aspects of it is the government going to emphasize to gain support during the discussion in the Diet? Now that the so-called interest rate upper limit exception has been removed from the list of amendments, which, back in September, was slated to be applied, I would also like to know how you think this development will impact the discussion in the Diet or public opinion.
First of all, the problem we face now is that some lenders knowingly provide loans to borrowers with no or insufficient repayment ability and that borrowers also borrow at an interest rate so high that it is virtually impossible for them to pay, and what is of particular note is that they cannot help borrowing an unnecessary amount out of the fear of having no money, only to find themselves in the misery of being unable to repay. Currently, both sides, lenders and borrowers, lack prudence. With this in mind, I intend to approach the multiple debt problem from a perspective of clearing up such an aspect by placing the focus of discussion on encouraging prudence, naturally with a view to having the problem solved through joint efforts of the ruling and opposition parties.
On the subject of the exception, it was a series of debates that caused it to be withdrawn. The first thought off the top of my head is, if the exception were to be applied, the simplicity of the bill's message, a message that the interest rate upper limit is lowered to 20%, would be somewhat weakened. From a consumer or user viewpoint, the withdrawal has, in my view, an impact of addressing what the times demand, especially in terms of taking the edge off the problem, as the 20% message will become more impressive to those who receive it.
What course will the discussion to be held during the current Diet session take as to any action intended to provide something like a safety net for those who are cut off from the opportunity to borrow, due to the removal of a step to buffer drastic changes?
One idea behind the now-withdrawn exception was to heed the possibility that some people might face the unavailability of any loans. Having designed the legislative bill to bring out a stronger message, however, we might be left with this issue. Nevertheless, partly assured by the fact that we have three years to examine the issue slowly before the relevant amendment takes effect, I feel confident that if there is a strong prospect of seeing such a situation unfold, we will be able to act to address it, thanks to the review provisions created in the proposed bill.
With respect to the problem of non-payments of medical insurance, my understanding is that today, each company will report the number of non-payment cases to the Financial Services Agency (FSA) but, reportedly, many cases of non-payments under riders were found yet again just last month. Given this turn of events, could you please give us some clue about what matters you will have insurance companies report on and focus your examination on in the future?
This is only a general statement but, if any issue is found as a result of examining their governance systems and payment management systems, I am intent on taking appropriate steps according to the specifics of the fact and other considerations, as opposed to simply looking at how large or small the number of cases of inappropriate payments is.
On a related note, having raised the same point last month in connection with similar problems that recently came to light one after another, I would also like your opinion about a point of view held by some that the FSA should have inspected their payment management systems in further depth, seeing that any incorrectness could have been detected beforehand in the course of regular supervision and inspection by the FSA.
As I previously said, this issue is related to the so-called financial product diversification as well; so, I'm expecting to see the level of our inspection efforts further improve in the future as we accumulate, among other things, more experience in inspecting similar incidents.
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