Banks, Life Insurers, and Descending Bureaucrats Flock to Loan Sharks
A Terrifying "Life as Collateral"

Consumer finance companies are currently facing unprecedented criticism. Perhaps it would be more accurate to say they are under a barrage of fire from all sectors of society.

Consumer finance, or loan sharking, is known for its high interest rates and aggressive collection tactics. Recently, the scheme involving life insurance contracts with "life as collateral" has come to light.

It's a system where consumer finance companies pay the premiums for short-term, small loans, and when the borrower dies, the debt is recovered with the insurance payout. In essence, it means "pay your debt by dying." In reality, there have been quite a few cases of heavily indebted individuals driven to suicide by the relentless collection efforts. It's a chilling thought.

Originally, consumer finance started as a place for ordinary people to seek small loans when they urgently needed money. Lending at high interest rates of 20-29% led to ballooning profits, causing consumer finance companies to grow into giants, with some even going public one after another. Their reality is literally that of loan sharks.

Consumer finance companies are legally prohibited from collecting deposits from ordinary people like regular banks do. They borrow from banks and lend at high interest rates.
Private banks see consumer finance companies as excellent lending opportunities, and some have begun setting up branches of consumer finance companies within their own head offices and branches.
Furthermore, major banks have begun to affiliate with consumer finance companies, working together on small-lot lending, driven by an unwavering pursuit of profit above all else.

The life insurance industry has also actively partnered with consumer finance companies. Since the finance companies cover the higher insurance premiums, they have fully cooperated, seeing it as a lucrative business.
Of course, even when consumer finance companies pay insurance premiums, many lenders have been making substantial profits using what were essentially penalty-free, gray-market interest rates of over 20%.

Another point that cannot be overlooked is that former bureau chiefs from the Ministry of Finance and retired officials from the Ministry of Finance are taking up executive and advisory positions at consumer finance companies. These are former officials who oversee the industry. It's only natural that major lenders would consider accepting these descending officials as a way to maintain connections with the government and secure stable loans from banks.

Looking at it this way, it's safe to say that banks, life insurers, and descending bureaucrats are flocking around major consumer finance companies. Indeed, they are the ones supporting these three entities.
Small-lot lending has its own value. I hope that lenders will take this opportunity for serious reflection and make a fresh start.

For reference, let's look at the latest figures. According to the Financial Services Agency, 17 major companies offer "consumer credit life insurance" when providing loans. In fiscal year 2005, the total insurance payouts received were 30.2 billion yen, covering approximately 52,000 cases.
Of these, cases clearly identified as suicides accounted for 4,900, or 9.4%, amounting to 4.3 billion yen, or 14.2% of the total.