FSA to strengthen grip on moneylenders under 2nd stage of revised law.
The revised moneylending business law will move into its second stage of implementation on Wednesday, allowing the Financial Services Agency to exert a stronger grip on consumer loan companies and other nonbank moneylenders.
The law will authorize the FSA to issue business improvement orders to moneylenders, in addition to the currently available options of nullifying their licenses and ordering them to suspend operations, if they engage in illegal activities such as the forcible collection of loans regardless of the time of day.
The wider range of administrative options is aimed at enabling the financial industry watchdog to address moneylenders' illegal practices more effectively.
The law, which was revised in December 2006, toughened penalties for violators in January as a first step.
Timed to coincide with the second stage of the toughened moneylending business law, consumer loan and credit companies will set up an association Wednesday to implement self-imposed rules designed to prevent excessive lending to consumers.
The revised law will eliminate so-called ''gray zone'' interest rates, which fall between two separate legal cap rates for consumer loans, by the end of 2009.
The Interest Rate Restrictions Law caps rates at 15 to 20 percent according to loan amounts, while the Investment Deposit and Interest Rate Law allows higher rates of up to 29.2 percent to be levied if borrowers consent to them in writing.
Major consumer loan companies have already lowered or decided to lower their maximum interest rates below 20 percent.
While moneylenders are now expected to toughen the screening of loan applications from consumers, less competitive companies are likely to strive for survival through consolidation, industry watchers said.