Things look better for the banking business in Japan now than they have for a long time, but truth be told, the recovery has been a long time coming. However, consumer lenders in Japan such as Acom, Aiful, Promise, Takefuji, and HonobonoLake have always had a pretty good deal over the same period.

Debt in Japan is relatively low-cost, and if you can lend out money at interest rates greater than 20%, you have a pretty good business on your hands. In recent years, some of the large consumer lenders partnered up with large banks in Japan, including Acom with Mitsubishi UFJ Financial Group (NYSE:MTU) and Promise with Sumitomo-Mitsui Financial Group providing additional, and likely cheaper, capital. It's worth noting that the economics of the business are attractive enough that General Electric (NYSE:GE), through its consumer finance business, owns Honobono Lake, and Citigroup (NYSE:C) has a division of its own, CFJ, as well.

Nonetheless, it seems that many of the players don't find the business attractive enough to operate under the laws established in Japan; it's become a regular occurrence for one company or another to fall under investigation. Japan's laws require clearly spelling out interest rates and prepayment rates, and not visiting or disturbing people at work when trying to collect on late payments. All these rules resemble those under which financial companies and debt collectors in the U.S. operate.

Beginning my morning reading of the Asahi Shimbun today, I see that Acom's offices are being searched for evidence of improprieties, such as not informing customers of interest rates. According to the article in the paper, it's possible that the company will be ordered to suspend its operations temporarily. This comes on the heels of Aiful's business suspension in April of this year for overly aggressive collection practices and a failure to provide customers with adequate lending information.

Consumer lending in Japan is likely to get more difficult, as interest rates rise for the first time in years and companies get squeezed on what they can charge customers and on the cost of their debt financing. In addition, legislation may cap the interest rates charged to customers at rates similar to what banks charge. It now appears that such a change is not imminent, but it's still something to be concerned about.

Anyone who has spent a week or more in Japan is probably familiar with these companies and their various forms of advertising (TV, billboards, hand-outs, etc.). I actually don't see anything wrong with these businesses, the advertising, or the rates they charge. If customers want to take out a loan and can't obtain a better rate from a bank, I believe it's their choice to take out a high-rate loan, much as consumers in the U.S. carry high-interest rate credit cards. I do, however, find it interesting that an industry with so many profitable competitors exists, but that there's constantly one company or another running afoul of many of the laws that govern them. Apparently, loan rates exceeding 20% just aren't good enough.

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At the time of publication, Nathan Parmelee had no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.