Japanese banks will suspend same-day personal loans

TOKYO – Banks in Japan will strengthen screening of personal loan applications starting in January amid mounting criticism that easy credit has contributed to a jump in personal bankruptcies and people struggling under heavy debt.

In Japan, banks issue loan cards that allow holders to borrow money by withdrawing cash from an ATM without providing collateral or specifying how the money will be spent. Those who already hold bank accounts can use their own ATM cards. The ease of obtaining loans, including 24-hour online applications, has led to a sharp increase in the number of users.

At the end of March, the outstanding amount of card loans amounted to about 5.6 trillion yen ($ 50.6 billion), an increase of about 70% in five years. Along with this dramatic increase has come a growing number of personal bankruptcies and criticisms that card loans encourage users to borrow more than they are able to repay.

Starting next year, banks will carry out background checks on new personal loan applicants with the police, a process that should take at least a day and, in some cases, even a week or two.

This will effectively make it impossible for banks to offer same-day loans, which they have used as an important selling point. “We have no choice but to drastically rethink our sales strategy” for card loans, said an executive at a large bank.

Background checks should also help eliminate criminal elements, such as members of yakuza organized crime groups.

In a related move, the Japanese Bankers Association said Thursday that its members will voluntarily introduce a measure to prevent excessive lending to individuals. Specifically, it will allow a family member or lender of a personal loan client to ask banks to limit lending. The association is looking to implement the measure in the 2018 fiscal year.

In addition, partner banks will publish the remaining amount of card loans each month starting in October. They will also set up a help desk for borrowers to seek advice and advice on their debt.

“We will deepen our efforts to nurture a healthy consumer credit market,” Nobuyuki Hirano, president of the bankers association, said at a press conference on Thursday.

While the planned measures may curb the growth of card lending, consumers will still be able to access instant loans from non-bank lenders.


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