Consumer Credit Law in the European Union and Japan: A Comparative Study

Abstract

In recent years, the possibility for consumers to engage in consumer loans have been rising exponentially. This brings with itself an increased possibility of consumers with debt problems and possible personal bankruptcies. This paper examines two pieces of legislation, from two very different regions, the European Union and Japan, designed to deal with these, and other problems.

The Japanese Money Lending Business Law, designed to combat the problem of people shouldering multiple debts, personal bankruptcies, and increasingly aggressive debt collection, can be said to have been successful. The amount of bankruptcies and people with multiple debt has dropped, and the interest rate on consumer credit was made clear within the law. It is not an unmitigated success, however, since the new restrictions on creditworthiness render a large part of the population unable to engage in consumer loans in the first place.

The European Union’s Consumer Credit Directive has, next to the objective of added consumer protection, the objective to harmonize consumer credit across the internal market. While it raises the bar for consumer protection rigidly, the harmonization of the internal market for consumer credit remains lackluster.

While both pieces of legislation have slightly different aims, the Japanese law can be said to have come to closest to fulfilling them, when compared to the European Directive. A harmonized interest rate or a standard concerning the creditworthiness of the consumer, as can be found in the Money Lending Business Law, might be worth considering in the European Union as well.