Statement Calling for Active Use of the System for Reduction of and Exemption from Double Loan Problems for Disaster Victims (Guidelines for Individual Debtor Out-of-Court Workouts) - Marking One Year since the Launch of the System -
Immediately following the Great East Japan Earthquake, the problem of “unreasonable debts” and “double loans of disaster victims” became a matter of great concern for many disaster victims. “Unreasonable debts” and “double loans of disaster victims” are the result of outstanding home loans remaining despite the fact that the buildings or other assets serving as collateral for the loans were destroyed by the tsunami or other disasters. This problem of “unreasonable debts” considerably hindered the recovery of the victims and areas affected by the Great Hanshin-Awaji Earthquake as well.
In light of the numerous concerns about this type of debt received at legal aid services instituted at shelters and throughout the affected areas, the Japan Federation of Bar Associations (the “JFBA”) has been encouraging all parties concerned to implement measures to systematically solve this problem. This encouragement has led to the establishment of the Guidelines for Individual Debtor Out-of-Court Workouts (the “Guidelines”) by the Research Committee consisting of the members from the Financial Services Agency (the “FSA”), financial institutions, the Supreme Court, and other experts as well as the JFBA in July 2011, followed by the commencement of applications for debt workout through ADR procedures based on the Guidelines in August 22, 2011. One year is about to pass since its commencement.
Debt workout in accordance with the Guidelines was expected to facilitate the reconstruction of the lives of many disaster-stricken people because of its considerable advantages, such as reduction of and exemption from debts with the assistance of attorneys and other registered experts, while avoiding disadvantages such as registration with credit bureaus and a demand of repayment made against a guarantor. Initially, some part of the Guidelines made it hard for affected people to use the scheme in practice, however, improvements in its operation were subsequently made several times, which led to the clarification of the application of the Guidelines to people living in temporary housing and the substantial increase of the amount of assets for disaster victims to keep in hand for rebuilding their lives.
However, it is regrettable that at present, this system has not been utilized by very many disaster victims. A mere 43 cases of debt workout have been resolved in accordance with the Guidelines as of July 27, 2012.
A major cause of its slow utilization lies in the fact that this scheme is not yet widely known to disaster victims and people around them. It is necessary for relevant parties, including the Management Committee for the Guidelines for Individual Debtor Out-of-Court Workouts, the FSA, news agencies, and local governments and so on, to further use resourceful and creative ideas for publicizing information regarding the utilization of the Guidelines to disaster-affected people. In order to easily convey information on the use of the Guidelines to the affected people, the JFBA has decided to call the Guidelines “the Reduction and Exemption Rules for Loans of Victims (the “Rules”)” and has been taking measures, including the production and distribution of leaflets and public relations activities with the use of various forms of media. It also intends to further reinforce such activities.
Being also creditors of debts owned by disaster victims, financial institutions are expected to play a significant role as well. In the meantime, many disaster victims only rescheduled their payment terms without reduction of or exemption from their loans. There have been cases in which some victims consequently have used their funds, including relief money which should have been used for rebuilding their lives and aid money for reconstruction of their lives, to repay their debts. Provided with public funds as well as functioning as the closest consultation counters for debtors, financial institutions should have the social responsibility to disseminate information of debt workout in accordance with the Guidelines to disaster victims, and should have the obligation of providing assistance in its active utilization. The FSA, with the authority to supervise and guide financial institutions, is urging financial institutions to take measures, including providing information about the Guidelines to disaster victims, with the notice dated July 24, 2012, by the Director-General of the Supervisory Bureau of the FSA (No. 1894) which states that financial institutions should have a strong grasp and understanding of the circumstances debtors are in and explain to debtors about how to use the Guidelines effectively in detail, such as the advantages and effects and should encourage the use of the Guidelines depending on the individual case. The FSA should continue to provide adequate guidance as well as exercise close supervision over financial institutions’ active use of the Guidelines with the attitude as in the given notice.
Releasing people afflicted by the earthquake from “unreasonable debts” will significantly contribute to their returning to a normal way of life. In addition, this process is vital to the reconstruction of the local economy. Resolutions will be facilitated for a number of cases for the first time with the use of the Rules for such purposes as the removal of hypothecation of land upon the commencement of movements in various areas such as group relocation for disaster mitigation.
The Rules should be easy to access for disaster victims so more people will utilize this scheme. For this purpose, a mechanism needs to be established to allow opinions of attorneys, including registered experts (such as attorneys) in the affected areas who thoroughly know of the actual situation of disaster-stricken areas by obtaining firsthand accounts from people there through their support activities, to be appropriately reflected in the operations of the Guidelines. In addition, a framework should be laid out to directly incorporate voices of disaster victims by setting up offices of the Management Committee for the Guidelines for Individual Debtor Out-of-Court Workouts in affected areas where full-time experts with the decision-making authority will be stationed. Moreover, it is necessary to make the Rules familiar to disaster victims.
With the one-year mark approaching since the launch of the operation of the system, the people and authorities concerned are required to take every measure for more active utilization of the Guidelines. The JFBA will also continue to endeavor to make the Rules useful for disaster victims.
August 3, 2012
Japan Federation of Bar Associations