Japanese Major bank will be imposed an improvement order by the FSA

The Mitusubishi Tokyo UFJ bank will be imposed an administrative order that asks to the bank to improve his unfair business relating mutual fund sales by the end of next week, the officer of the FSA said.[1]

Complaints to the financial institutions increasing

According to the survey of the NCAC,[2] consumers who suffered troubles with investment companies are 6.9%. 32.1% of complainers annoyed their insistence solicitation of investment products sales in spite of consumer’s rejection. 10% of consumer forced to make a contract of financial products although they went to bank for deposit. The sort of financial product varies; 24,1% of consumers was recommended with insurance product, and in next 19.6% is a mutual fund. Financial product related foreign currency, which is extremely high risk as financial derivative products and would not be suitable for consumer in common, is solicited to 15.2% of consumer.The financial institutions that consumer were suffered by trouble are securities companies (29.5%), banks (28.6%) and insurance companies (22.3%).

Sales of investment related products increasing in a bank

Since the starting “big bang” in December 1998, the outstanding of sales of mutual fund by banks have been increasing gradually. In 2005, the ratio of mutual fund sales by banks reaches almost 50 %. The banks strengthen their business transferring from finance to selling investment products like as a mutual fund much more.

In the end of March 2007, the outstanding of the mutual fund sales for personal investors in three mega banks, Mitsui Sumitomo, Mitsubishi Tokyo UFJ and Mizuho, is estimated totally JPY 7.7 billion, increasing 27% compared the previous year.[3]

Since April 2001, the bank was able to deal with insurance products. It made the banks accelerate to sell such investment related products.

Poor compliance

But their compliance regarding sales of investment products should be said as poor condition. For instance, it is indicated that although the officer of the bank caused his customers a loss in virtue of failure order, he only apologized and did not pay any damage compensation. The FSA officer blames the attitude of the bank as ignoring the customer’s interest.According above mentioned tendency, consumers might be annoyed and confused over the strong and persistent solicitation concerning financial product with high risk by banks more and more if banks disregard to complete their sales manner due diligence .

Administrative sanction on June 11, 2007

The FSA ordered  an administrative sanction to the Mitsubishi Tokyo UFJ Bank on Jun 11, 2007. The sanction, based on the Banking Law (sec. 26(1),sought fiercely  the bank of due diligence.   

As to the sanction, refer the web-site, http://www.fsa.go.jp/news/18/ginkou/20070611-1/02.pdf

 

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[1] msn.co.jp/keizai/kigyou/news/20070609k0000m020098000c.html

[2] http://www.kokusen.go.jp/pdf/n-20060322_1.pdf

[3] http://markets.nikkei.co.jp/fund/news.cfm?id=d2c2101130&date=20070430

Allocation of a restitution to a new loan

The Supreme Court ruled a little bit confusing decision on May 7^th, 2007.[1]

Law and case law

According to the Interest Rate Restriction Law (IRRL), the excessive repayment against restriction of the law that stipulates the upper interest rate is void (sec. 1(2)). On the other hand, If he recognizes his reimbursement is excessive against the law and  repays it honestly voluntary, he can not enjoy getting the restitution relief from the lender (sec. 2)..Since last year, the Supreme Court Decisions approved the borrower’s restitution claims broadly. The court indicated that it was almost impossible for a borrower to refuse his excessive repayment even if he recognized that the excessive interest rate was breach of the IRRL and he was no duty to pay it. In other word, the court said that the excessive repayment was never made voluntary in usual.

This ruling

The claimant took a payday loan from the defendant, a consumer loan entrepreneur, repeatedly. The interest rate was very high beyond the upper rate of the IRRL, but there rate was within the upper interest rate restricted by the Investment Deposit and Interest Rate Law that impose criminal sanction against it.When the plaintiff took the new loan in question, the amount was smaller than his existing restitution claim arose by past excessive repayment. Therefore, the borrower asked to pay the remaining difference after allocated his existing restitution claim to the outstanding account of new loan in question.

The court decision

The Supreme Court approved the plaintiff’s claim. We can find an interesting judgment in this decision; the borrower can claim relocating the excessive repayment to other existing outstanding account, when the payday loan was repeated on basic contract between a borrower and a lender. On the other hand, if the borrower has no unsettled account at the time the restitution claim generated, the borrower principally cannot seek relocating the existed restitution claim to his unsettled account arose at the later date automatically. However, the court said, if the payday loan were repeated between the contract parties, the existing restitution claim should be relocated to the other outstanding account even if it was arose after his restitution claim generated. The reason was explained that both a former loan and the latter one ware presumed identified. Therefore, the court concluded that the plaintiff could asked to relocate his existed restitution claim to his  unsettled account occurred at the later date.

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[1] The Supreme Court, http://www.courts.go.jp/hanrei/pdf/20070607111814.pdf