Wednesday, June 11, 2008

Loan Sharks and the Civil Code

"The Supreme Court overturned a high court ruling and ordered a convicted former gangster and illegal moneylending group boss Tuesday to compensate plaintiffs not only for extortionate interest charged, but also the principal of the loans.

"The top court's No. 3 Petty Bench sent the case against the former head of the loan shark group, Susumu Kajiyama, a former senior member of Goryo-kai, a criminal gang affiliated with Japan's largest crime syndicate, the Yamaguchi-gumi, back to the Takamatsu High Court to recalculate the amount of compensation.

"The high court had previously ruled that the plaintiffs only be compensated for the amount of interest they paid.

"Kajiyama's loan shark group had forced the plaintiffs to pay off their loans at extortionate rates of interest--reaching several thousand percent on some occasions.

"The 11 plaintiffs from Ehime Prefecture have sought a total of about 35 million yen in the damages suit.

""I cannot permit the principal amount to be deducted from the compensation," Justice Kohei Nasu said in handing down the ruling.

"This judicial ruling that people do not have to return money they borrowed from shady consumer loans operations likely will deal a large blow to such outfits and may lead to financial relief for their victims.

"According to the ruling, the plaintiffs borrowed money from illegal loan outlets controlled by Kajiyama between November 2000 and May 2003. They were made to pay back the loans at exorbitant annual interest rates of between several hundred and several thousand percent--far higher than the maximum rate of 29.2 percent permitted under the Investment Deposit and Interest Rate Law.

"The focus of the trial was on whether the plaintiffs would be able to have their initial principals returned, as well as the illegal high interest payments they made.

"The top court ruling applied a provision in the Civil Code that "the return of payments made for things contrary to public order and decency cannot be demanded" to the business of loan-sharking.

"The ruling indicated that loan sharks should not be able to demand victims who borrowed money from them pay back their loans, and that the victims should be compensated for the entire amount they have already paid back, including the principal.

"The top court termed the huge profits made by Kajiyama, 58, from the illegally high interest rates "an unethical act."

"He negated the high court's ruling that the principal received by the plaintiffs should be deducted from the compensation.

"Lawsuits demanding compensation are being brought against loan shark outfits across the country, but rulings have differed over the extent of the compensation."

By Yomiuri Shimbun(6/11/2008), Link to article (last visited 6/11/2008)

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