Original article by Kazuki Watanabe(渡辺一樹)

 

 

 

“Your item converts to cash at one touch!”

A new-born Japanese FinTech application CASH is drawing tremendous amount of attention upon its release on June 28. Supposedly due to a deluge of orders, its operating company BANK had to temporarily shut down the buying service. But the real cause of this attention is a series of questions over its controversial nature–that it could practically be a money lending service.

So how does it work? The user simply chooses a brand and its items to sell such as watch, jacket, or purse, then takes snaps of these items to send. The app automatically measures their monetary value up to 20,000 yen per item. Once you click Okay to accept the assessed amount, it transfers to your designated bank account.

This process follows by either 1)turning in your item, or 2)canceling the transaction to reimburse, which costs 15% surcharge.

Is it really a simple pawnshop?

The terms and conditions page states that CASH is a simple “service by which BANK corp. purchases the user’s items.” But the conditions for cancellation and reimbursement are something unseen from ordinary sales contracts:
(1) The user may cancel the transaction within 2 months
(2) In case the user cancels the transaction within 2 months, the user reimburses the money with 15% transaction fee.

This practice is somewhat fishy to be a second-hand marketplace activity, where the paid item should be shipped away as soon as possible, not within the period of 2 full months. So why does it exactly allow such a long time?

“De Facto bonded private loan,”

Finance attorney Aki Yoshii points out that this type of service is more or less “similar to a mortgage loan.” Always exposed to the risk of not getting paid back, lenders secure collaterals to collect in case the money cannot be paid back. If you apply this idea to CASH, it does not seem all that different from basically a 2-months moneylending contract with 15% fixed interest rate secured against a tax free brand name item.

 Attorney Yoshii continues

“By common sense, a second-hand item is an unwanted item he/she would rather not keep next to them for long. Additionally, it is difficult to deny this app is for loaning, when its very UI operates under the premise of reimbursement.”

Funny enough, during his interview with fashionsnap.com, director Yusuke Mitsumoto of BANK said: “If you must label the field we aim to challenge, it would be consumer finance.” But the moment CASH is labelled as a consumer finance business, it gets tangled up in a serious legal problem — the violation of loan business law.

“Any business involving the intermediary role of lender and borrower has to be officially registered. The moment it begins to make profits from lending while being unregistered, it is subject to 10 years in prison or fine of 300 million yen.”

So far, the registration mark for second-hand business is visible on the BANK website, but none qualifying it as a loan business.

Why this has remained ‘Uncharted’

If the transaction fee got defined as the ‘interest’, it would make this matter worse.

“15% interest for 2 months, that’s as high as 90% per year. If you can actually pay back ahead of schedule but it still remains 15%, then that’s even higher.”

“The investment law clearly bans usury. A business which lends money with interest higher than 20% per year is punishable under the Article 5 of this law, which may result in up to 5 years in prison or up to 10 million yen in fine.”

Attorney Yoshii believes it is only foolish to assume everything is allowed just because the terms are written in the style of sales contract, and that is why there are experts out there to consult with. He concludes his opinion with a final warning:

 

An uncharted territory might have remained uncharted all these years not just because people overlooked it, but maybe because it was too dangerous to handle.

Byunghun

Byunghun

Founder, editor-in-chief