Analysis of Debtors' Attributes by the Cap Amount Regulation

Abstract

The Japanese government fully enforced the Money Lending Business Law in June 2010, and the cap amount regulation was introduced to the money lending market at the same time. The cap amount regulation prohibits lending in excess of one third of the debtor's personal annual income in principle. The system has not been introduced in major advanced countries. The government's revision of the Money Lending Business Law including the introduction of the cap amount regulation caused the market to contract dramatically. At the time, the media reported concerns over the impact on debtors. Nevertheless, there has been almost no academic research investigating the impact of introducing the cap amount regulation to the money lending market on debtors, except the authors' research. Hence, the present study aims to verify the efficacy of the regulation by analyzing its impact on debtors from their debt status.

In this paper, we collected the debtor's repayment data from two large lenders during one year later at the introduction, and analyzed the repayment behaviors which the cap amount regulation affected by debtors' characters. From the above analysis, we found the result that the debtors got worse the repayment behaviors after the cap amount regulation with servicing. In summary, we argued that the cap amount regulation is lacking in efficiency of regulating the lending market.