＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49）さん / X
A few years ago, the issue of “bilateral factoring,” a form of illegal lending disguised as “factoring,” a legitimate financial transaction, was brought up in the Diet.
１．What is “Factoring”?
“Factoring” is a financial business in which a factoring company purchases a company’s accounts receivable and collects the payment (manages and collects the receivables) at its own risk.
A company sells its accounts receivable, such as accounts receivable and notes receivable, to a factoring company by paying a fee, and the factoring company is responsible for collecting the receivables.
Depending on who bears the burden in the event the payee becomes insolvent, there are two types of factoring: “factoring with recourse”, where the client company bears the burden, and “non-recourse”, where the factoring company bears the burden. “Non-recourse factoring” is the most common.
２．What is “two-party factoring”?
Normally, factoring is a contract (a tripartite receivables assignment contract) between a company (creditor), a business partner (debtor), and a factoring company. This is called “three-party factoring.”
On the other hand, “two-party factoring” is a contract concluded between the company (creditor) wanting to raise funds and the factoring company. Since there is no need to notify or get consent from the business partner (debtor) that the receivables have been transferred, funds can be raised without the business partner or third parties knowing. However, it has the disadvantage that the fees are very high compared to “three-party factoring”.
３．What is “Illegal lending” disguised as “two-party factoring”?
This is “personal lending” using social media or flea market apps, but it has been pointed out that the lenders of funds may be “loan sharks” posing as “individuals.”
In this “bilateral factoring,” the buyer of the receivable entrusts the seller with the collection of the receivable. For this reason, a “debt collection service agreement” is concluded between the seller and the buyer. This is a contract in which the seller bills and collects the receivable free of charge.
In addition, although the terms and conditions state this is “non-recourse factoring,” this is not explained to those requesting funds, and in reality it appears that they are exercising their right of recourse.
The problem with this “illegal lending disguised as bilateral factoring” (pseudo factoring) is that it is essentially “secured loans” that exceed the legal upper limit of interest rates. It seems that the effective interest rates of “pseudo factoring” can range from 100% to as high as 360% per year.
However, since there are no specific laws regulating this, and “victims” are reluctant to report it, it seems difficult to get a grasp on the actual situation.
As with “special fraud,” criminal methods have become more sophisticated and ingenious in recent times, but this is not a “legitimate fintech (financial technology)” that is a new financial service that makes full use of IT technology, but a “crime” of “illegal conduct.” It is considered to be an act that violates the “Money Lending Business Act” and the “Interest Rate Restriction Act.”
４．Background to the increase in “pseudo factoring”
In 1986, there were more than 47,000 registered moneylenders, but by 2017, that number had plummeted to around 1,800.
The reasons for this include
(1) the gradual reduction of legal maximum interest rates, making it more difficult to maintain profitability,
(2) huge losses due to claims for the return of overpayments, and
(3) the credit crunch following the Lehman Shock, which made it difficult to raise funds for a time.
The Money Lending Business Act, which came into force in 2010, was intended to reduce the number of people with multiple debts, but ironically ended up reducing not only the number of people with multiple debts but also moneylenders, leading to it being mocked as the Money Lending Business Prohibition Act.
It would be a complete disaster if this resulted in the rampant use of sophisticated illegal lending methods.