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Saturday, Nov. 19, 2005

2,252 suits filed against usurious consumer lenders


Staff writer

Debtors nationwide filed lawsuits Friday seeking a court order that would force consumer finance firms to repay them for excess interest charges.

According to Yoshio Honda, secretary general of a borrowers' support group, 2,252 suits seeking a combined compensation of 2.1 billion yen were filed with district courts.

An estimated 100 consumer finance and credit card companies were named in the lawsuits.

"There are so many people who are troubled by the extremely high interest rates of consumer loan companies," Honda said at a news conference after a number of actions were filed with the Tokyo District Court.

"Many (people) are crying because they cannot pay the money," he said. "But I want people to know there are interest charges they don't need to pay, and there is a way to get that money back. . . . I hope these lawsuits will help (borrowers) rebuild their lives."

Attorney Kenji Utsunomiya told the media the suits would help free borrowers from their debts.

"I would like them to use the law as their weapon and fight," he said.

Critics often point out that the law has a double standard regarding interest rates.

The Interest Rate Restriction Law states that the maximum legal rate on loans is between 15 percent and 20 percent, depending on the amount borrowed. This civil law states that any interest charges exceeding the limits are void.

However, the Investment Deposit and Interest Rate Law, a criminal law, says the legal limit on loans is 29.2 percent. Those who charge more than the legal limit under its provisions can be imprisoned for up to five years and fined up to 10 million yen.

This, Utsunomiya said, leads to a gray zone for rates of between 20 percent and 29.2 percent -- interest rates in this zone are illegal, but violators are not charged under criminal law.

Most consumer loan companies set their interest rates in this gray zone, hesaid.

Because the gray zone interest charges exceed the limits under the Interest Rate Restriction Law, the plaintiffs' lawyers argue the borrowers should not have had to pay them and their payments should be refunded.



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