Abstract
In December 1999, the Investment Control Law passed the Diet as a way to deal with over-indebtedness and illegal collection induced by SFCG (Shoko Fund) and Nichiei, which were the two biggest companies in Japan’s business finance market at that time, so-called “shoko-loans problem”. As a result, in June 2000 the maximum annual interest rate was suddenly lowered from 40.004% to 29.2%. The maximum interest rate was applied to not only business finance lenders, but also consumer finance lenders. Thus, most of consumer finance lenders were thrown into confusion by the sudden strengthened business regulations. Then, the JCFA (Japan Consumer Finance Association) conducted a questionnaire survey to grasp the member’s economic conditions.
The author acquired the date set of the survey from JCFA and analyzed it in this time. Through the analysis, he found that lowering the interest cap without enough grace period had led many consumer finance lenders to excess lending for short-term profits. Later, their credit management may have partially induced “heavily-indebted people problem” in Japan’s consumer finance market.
