Stop all further charges once a borrower's interest and fees add up to the amount originally borrowed
In short
- For small loans, lawmakers put a ceiling on the total interest and fees a borrower pays.
- Once the total reaches the amount borrowed, the lender can charge no more interest.
- Late penalties and refinancing fees count toward that same total.
- This ends a business that earns more the longer it keeps charging people who cannot pay back.
If this comes true
A delivery driver borrowed money for a car repair before payday. In the month the total interest reached the amount borrowed, the charges stopped, and the driver now uses the rest of the paycheck to pack a lunch for their daughter's field trip.
Perhaps
In a town where lenders have pulled out, people stuck with a sudden expense might start knocking on the door of a moneylender with no sign.
Water so far 💧 0
The proposal in detail
The rule covers small, short-term loans that individuals take out for living costs. This includes bridge loans until payday, unsecured consumer loans, pay-later installment services, and pawn loans where an item is left as security. Long-term loans secured by a home and loans for business are not covered. For loans in this range, all the interest, fees, late penalties, and costs of refinancing or extending repayment that the borrower pays are added together. When that total reaches the same amount as the original principal, the lender is banned from charging any more interest or fees. The borrower still owes the rest of the principal, but no new interest is added to it. Counting the total over again from zero is not allowed when a loan is refinanced or switched to another product, and a refinance from the same lender or its affiliated companies is counted as the same debt. Anything collected above the cap must be returned to the borrower, and a lender that does this repeatedly loses its license to operate. In a society that already has a cap on the annual interest rate, lenders must meet both limits. If a lender made a loan without checking whether the borrower could repay it, the collection of the remaining principal can also be limited.
BenefitsLending that profits most from people who keep paying stops working
A cap on the total works because it does not care what the charge is called. With only an interest rate cap, lenders could keep collecting by renaming charges as fees or extension charges, but when the line is drawn at the total the borrower has paid, any name hits the same ceiling. This ends the worst part of the business, where the longer a lender holds on to someone who cannot repay, the more it earns. Lenders do better by lending to people likely to repay, and only what they can repay, so they begin to check income before lending. For borrowers, even in the worst case there is an end in sight to what they will pay, which closes off the path of being swallowed by a snowballing debt and losing family and work. The duty to repay the principal remains, so this is not a scheme that makes borrowed money free, but one that protects people who are trying to repay honestly. Unlike an interest rate cap, it lets short-term lending itself continue, so the way to borrow for a sudden expense stays open while only the debt trap is removed. Money that used to disappear into overpaid interest goes back into the life of the community, such as family meals and children's school supplies.
DrawbacksLegitimate lenders leave and invite in illegal moneylenders
Under this cap, the riskier the borrower, the less profit the lender makes. Then the first thing lenders do is stop lending to risky borrowers. People with unstable income, a damaged credit record, or few documents to prove their identity, exactly the people this was meant to protect, are turned away by legitimate lenders. Sudden expenses do not go away, though, so these people have to beg family or acquaintances, or turn to people who lend outside the law. Lenders outside the law have no cap and no license to lose, and their collection comes with violence and threats. Legitimate lenders may charge high interest, but at least there were papers and the law. Some small local lenders, and small financial groups where members help each other, may also be unable to continue under the cap. A cat-and-mouse game will probably go on too, as lenders stop lending just before the cap and look for loopholes such as shifting the loan to another company. Protecting the freedom to borrow and protecting the borrower collide here, and one of them will have to be given up a little.
Learn the background
Sudden needs for a little money, such as a sudden illness, a broken-down car, or a rent shortfall, come up more often for people with low incomes. Banks avoid small, risky loans, so these people turn to lenders who make short loans at high interest and fees. Once someone borrows, they cannot repay the full amount on the due date, so they pay a fee to extend it, then extend it again and again. Before they know it, they have paid many times what they borrowed, yet the debt itself has not shrunk. This business is built to make more profit from people who keep paying without ever finishing than from people who can repay. Even when a cap on interest rates is set, loopholes appear under names like fees and extension charges. There is also a bind: if rates are pushed too low, lenders withdraw and there is nowhere left to borrow. In many societies, action has stalled for this reason. Lenders know that many borrowers have little financial knowledge and no room to choose. Telling borrowers to be careful does not help someone who cannot cover tomorrow's rent, because for them it is not a choice they can make.
Choose them ready to accept their drawbacks too (up to 5)
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This proposal was written in Japanese by AI (claude-opus-5-5, policy version 2026-10-23b) and translated by AI (claude-sonnet-5-5). Nobody has checked the facts. Read the original (日本語) How the AI writes