Citi has operated in Japan since 1902 and provides various financial services including consumer lending. Consumer lending involves loans made directly to individuals and differs from pawnbrokers or banks. Citi faces challenges in Japan's consumer lending market including lawsuits over interest rates charged in the legally gray "grey zone" and potential repayments of excess interest charged on past loans. Cultural differences between Japan and the US also impact Citi's management style and image issues. While smaller issues like default rates are manageable due to Citi's financial backing, larger disputes around interest rates could result in significant repayments and impact profits. To be successful, Citi must adapt to customer needs, maintain transparency, and prepare for rapid changes in Japan's consumer

1. Consumer Lending in Japan:
Citi CFJ

2. Agenda

3. CitiBank
• Citibank was founded in 1812, as the city bank of New
York.
• Citibank has retail banking operations in more than 100
countries around the world.

4. CitiBank Japan
Yokohama in 1902
Maintained its presence without offering full-scale services.
Citibank in Japan provide services to:
1. Corporate
2. Consumer
3. Investment banking
4. Brokerage operations and credit cards businesses

5. Consumer Finance
 Consumer finance has to do with the lending process that
occurs between the consumer and a lender.
How is it different than pawnbrokers or banks?
(Question addressed to the audience)

8. Defaulting Loans
Always been a problem, though not urgent due to Citi CFJ’s
financial backup from Citi group in the U.S.
Improving economy results in less personal bankruptcy and
therefore less defaulting loans.

10. Lowering of Cap Rate
Possibility of a law lowering the interest cap to 25% (CSL)
All the loans with higher interest rate would decrease
revenue earned
Administrative reconstruction
Arguably not a big issue due to the financial backup from
Citi group in the US

12. “Grey Zone”-interest
2 Laws, ILL and CSL
ILL dictates 15-20% (depending on loan size) addressing
banks
CSL dictates 29.2% addressed for Consumer Finance
Companies

13. Requirements for CSL
• Registered lender
• Loans deemed voluntarily
• Lenders delivered printed documents that fulfill specific
requirements of loan.

14. Problems occur when lawyers argue that the third
requirement is not fulfilled when lending through ATMs
and/or internet.

16. Lawsuits
Two lawsuits affecting Citi:
1.Obligating lenders to disclose transaction history if
requested by borrowers.
2.Loans charging “Grey Zone”-interest that does not fulfill the
requirements is technically illegal.

18. Repayment of Excess Interest
Ruling deciding whether or not Aiful needs to pay out excess
interest. (Pending)
If ruling is against Aiful it is highly likely that Citi CFJ will
have to repay all excess interest that has been charged on
loans with an interest rate in the “Grey Zone”-area that
was deemed not “Grey Zone”
Up to ten years back on any loan applicable

19. Example:
• A one million yen loan with a cap of 29.2%(CSL) is
deemed unfulfilling because of lacking documents and
should therefore be caped 15% resulting in Citi being
deemed to repay 14.2% of excess interest for a possible
period of 10 years.

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24. Management Style
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• 1980: major consumer finance companies entered Japan
• Support by Japanese government
• Failed to adapt
• Debt counseling & historical repayment record
• 1986: all U.S. CLC’s except Associates left the market
• Associates’ half Japanese CEO & employees

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27. Other medium/small consumer
lending companies
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• Priva （プリーバ）
• Eiwa ( エイワ )
• Rakuten ( 楽天 )
• Nakano （ナカノ・ラビット）
• Familia （ファミリア）
• Alco System （アルコシステム）

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29. Number of Manned & Unmanned Branches
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31. Cultural differences
Social obligations
+ lose face
= ATM machines
-over-lending
-multiple lending

32. Image issue
TRUST?
Word-of-mouth
Lack of transparency
suicide Lawsuits
G
rey
zone
Financial debt
Excessive lending
confusion

33. Ethical dilemma
Good vs. bad
Positive life quality vs. negative
Help vs. take advantage
UTILITARIANISM: the greatest good for the
greatest number of individuals
Profit vs. charity

34. Unstable Business
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35. Conclusion
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• Citi constantly needs to adapt to customer needs, reinforced by the process of
acquisition and the maintenance of transparency. Additionally, they should be
aware of new trends such as the unmanned branches since they proved to
increase the risk of default and the threat of repaying overpaid interest.
• Smaller issues such as defaulting loans and lowering of cap rate is
insignificant due to low risk as well as low impact as a result of strong
financial backing. More importantly, the grey zones disputes end result;
namely the possibility of repayment of interest is of the highest priority. In
order to cope with this issue CITI needs to prepare for a potential huge
amount of lawsuits by stacking up cash and lawyer up.
Cultural differences did not only create opportunities for Citi but at the same
time it also accountable for a lot of challenges Citi needs to face. Culture
influences the image issue as well as the ethical dilemma, while the biggest
problem is remains as the instability of consumer lending. Citi needs to focus
on winning people’s trust and being prepared to adapt to the upcoming rapid
changes.

36. If we had more time...
we would like to look at:
1. Loan security
2. Lawsuits
Relevant for improving Citi’s Profit
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37. Thank you for Listening!
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38. Questions?
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