By Finbarr Flynn and Shingo Kawamoto Jan. 19 (Bloomberg) -- Japan will implement rules that tighten lending restrictions for Aiful Corp. and other consumer finance companies set to take effect in June, though enforcement may be eased to aid borrowers, a government official said. The Financial Services Agency may consider changes to rules for implementing a law that puts a ceiling on the amount of loans a borrower can take, said Kenji Tamura, the third-ranking political appointee at the regulator. The law also calls for a 20 percent cap on interest rates lenders can charge customers. “We’re working on the assumption that the law will be fully implemented,” Tamura said in an interview in Tokyo yesterday. “Postponing the lending cap would require a change to the law, and that’s not under consideration.” Promise Co., Acom Co. and Aiful, Japan’s three largest consumer lenders by assets, have jumped more than 50 percent in the past month in Tokyo trading amid speculation the government may relax legislation to revive an industry hobbled by more than 4.4 trillion yen ($48 billion) in losses since a 2006 crackdown on lending practices. “Many investors believe that a relaxation in the rules will mean a big change and move the market,” said Wataru Ohtsuka, a Tokyo-based analyst at Nomura Securities Co. “It is difficult to assess the impact any relaxation of rules may have for the four big consumer lenders, but it won’t be so big.” Lenders Fall Promise led Japan’s consumer lenders lower in Tokyo, sliding as much as 6.7 percent to 1,005 yen, and traded at 1,011 yen as of 12:50 p.m. Acom fell as much as 2.1 percent and Aiful declined as much as 1.7 percent. The Topix consumer finance index fell 1.8 percent. Legislators in December 2006 gave consumer lenders three and a half years to cap rates and to limit each borrower’s outstanding debt to no more than a third of their annual income. Lenders had previously charged as much as 29.2 percent interest. Rules providing exemptions from loan caps for owners of small companies is one area where rules could be relaxed, Tamura said, citing the need to address funding difficulties in a stagnant economy. The regulator announced Nov. 13 the establishment of a project team to examine possible changes to how the law should be implemented, as mandated by the 2006 legislation. Tamura, 41, one of five members of the team, has been tasked with holding hearings on how new regulations should be enforced. ‘50-50 Chance’ Tamura last month submitted a report on the hearings to Kouhei Ohtsuka, deputy minister at the agency. Tamura said he would like the project team to begin discussions as early as this month on the need for revisions to ordinances. There is a “50-50 chance” that there won’t be any changes to current decrees, Tamura said. Shizuka Kamei, Japan’s financial services minister, said at a press conference today he hadn’t received the project team’s report. While there is strong demand for loans, the current circumstances don’t necessitate changing the planned legislation, he said. Government and private financial institutions should do more to meet funding needs and he wants to consider allowing Japan Post Bank Co. to meet emergency funding needs for individuals, he added. To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.netShingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

Source