The banking industry's card loan business is expanding, with outstanding lending of this type extended by domestic banks reaching ¥5.67 trillion at the end of June — an increase of 1.7 times over the past five years. Free from the lending limits that bind consumer loan firms, both mega-bank groups and regional institutions have flocked to the profitable card loan business as interest margins on lending to businesses and housing loans shrank amid the ultra-low interest rate policy of the Bank of Japan. That has led to criticism that the banks, by providing easy and convenient access to uncollateralized loans to individuals at ATMs, have taken the place of consumer loan lenders in providing the means for people to borrow beyond their repayment capacity and fall into multiple debts.

On guard against the introduction of regulations such as lending caps, the banking industry responded to the criticism by announcing voluntary measures in March urging banks to tighten their screening to avert excessive lending. But the amount of such loans continues to increase, and the Financial Services Agency plans to inspect the banks to see whether they are indeed making the promised efforts, such as better grasping the repayment ability of borrowers to prevent them from borrowing beyond their means. As competition among banks seems poised to tighten in this segment, the government should carefully consider whether leaving it up to their voluntary efforts will be enough to stop the problem from getting worse.

Multiple indebtedness of borrowers from nonbank moneylenders such as consumer loan firms used to be a serious social problem. Heavily indebted people continued to borrow from one lender to repay their loans from another, while forceful and persistent loan collection tactics cornered many into taking their own lives. An amendment to the law on the money-lending business, which came fully into force in 2010, prohibited such loan collection practices and banned the moneylenders from loaning more than one-third of the borrower's annual income. Lending by consumer loan firms have since declined.