Details of the Financial Instruments and Exchange Act

You can view details of Act and Regulations concerning the Financial Instruments and Exchange Act on the FSA web site. The law has been enforced September 30, 2007.

Do lenders have to reimburse all of borrower’s repayment, even if APR is 84%?

Consumer loan contract, in which APR was 84%, was void, the Osaka Court of Appeal ruled on 11th July 2008;  the ruling ordered the defedent mony lender paying reimburse of all of payment including a capital sum that was loaned to the plaintiff.

Himeji Branch of Kobe Distict Court did not approve the claim of the plaintiff who asked to repay all of his payment; however, Osaka Court of Appeal changed the original court’s decision. 

Money lenders are punished based on the Investment Law, if loan APR is in excess of 109.5%, whereas loan APR exceeding from 10% to 20% is void by the Interest Restriction Law. In this excessive lending case, court ruling tend to decide that money lenders must reimburse all of repayment including lenders’ capital sum.

But, if APR does not exceed above mentioned interest rate, it is not clear whether courts decide that lenders have to repay their capital sum to borrowers in addition to lawful and excessive interest, even though the contract is void in breach of ethical rule (civil law, art.90).

Himeji Branch of Kobe Distict Court did not approve the claim of the plaintiff who asked to repay all of his payment. However, Osaka Court of Appeal changed the original court’s decision ubi supra.

Shrimp investment fraud in fictitious overseas farms

The Yomiuri reports a recent shurimp fraud case on 4th adn  5th  July 2008.

The chairman of an investment firm  was arrested Wednesday on suspicion of swindling money from investors in fictitious overseas shrimp farms.  According to the police, Tokyo-based World Ocean Firm has collected about 85 billion yen from investors, about 75 billion yen of which was used to pay dividends and return the principal to investors to secure their trust. The police believe the company made 10 billion yen through the fraud. According to a senior official at the Metropolitan Police Department, the company established nine accounts to receive money from investors. About 84.85 billion yen was transferred to the accounts from about 35,000 people from spring 2005 to May 2007.

The chairman  was an former executive officer of Yuzen, a Tokyo-based company that employed a multilevel marketing system. The company started collecting money from about 3,000 people in 1998 telling them, “If you pay a 1 million yen membership fee and purchase top label products and cosmetics, you will receive 250,000 yen each month.”

Why victimes being frauded?

People usually says: ‘why did victims invest their money so easily”; why did victims believe the fictitious story of scammers ?.  Yes, these question might be equitable and naiveté. But, if  people says that the victims should endure their damages, I cannot answer ‘yes’; the reason is that the scammer is professional of fraud and the victims is amateur.

I think that the government should take responsibility to this scam. This kind of investment scheme which raises money widely from consumers should have been restricted strictly by law. Present Financial Product Sales Law does not regulate this kind of scheme in spite of recent law reform . However, similar scam has been conducted in several decades, therefore the government could foresee this scam.

The scam might have  been caused by the poor welfare policy of the government, because many of victims is elderly who worry about their future.

Unlawful advertisement over consumer credit

The Financial Service Agency conducted a survey ads of consumer lending business; the result  was reported on 4th July 2008.

According to the result, 80% of ad was unlawful. Some of them doed not show terms and condition that must be discribed on ad such as interest rate. Some lenders make misrepresentation on ad; many lenders stress significantly easiness for borrowers to be  loaned money.

You cannot avoid seeing the ads even in the case where the ads are provided via newspaper. When the ads is provided via tv, it should be regarded as nuisance: you cannot keep yourself away from these ads; many consumers might be induced to get loan without mental resistance. These practices, especially tv commercial of consumer credit, must be prohibited, because they shall invite consumer overindebtedness, therefore .

Osaka District Court disicion of exessive Kimono sales

Osaka District Court decision, on 30th January 2008, regarding excessive kimono sales is of a case of illegality based on undue influence. 

Excursus

A plaintiff has reached a settlement with a defendant on a court procedure, on 4th July 2008; the defendant agreed to pay 1,550,000 yen to the defendant that a original court approved as damages compensation.

ADR about securities dispultes

The Japan Securities Trading Association is about to get ceritificeation of ADR and is  entitled to instrumentality procedure regarding serurities disputes within June. The association will take the precedure nationwide, in 47 prefectures.

The Association has dealt with mediation procedure of resolution regarding securities trouble, entrusted by securities companies. The number of consultations was 6,438; the number of claims was 773; and the number of petitions of mediation was 173 in year of 2007.

However, the claims which can be resolved in the procedure would be limited to disputes which the difference between businesses and customers is small or in the troubles that are regarding evaluation of damages, I suppse from my experience.

The court procedure might be more effective to get preferable resolution if you can take consultation of your claims to suitable lawyers.

If you choose the procedure of ADR, you should refer the criteria of resolution concerning court rulings about serurities cases. You can view useful information of the ruling on lawyers group website “Shokenmondai Kenkyukai”. 400 court decisions has been listed in the site and the useful consideration  and comment about significant cases are posted. The information is provided by the lawyers who work for victims damaged by securities trouble.