Waseda University Institute of Comparative Law

     The proposal for revisions of the Law on Specified Commercial Transactions and the Installment Sales Law were both approved in Cabinet meeting and put before the Diet on March 7, 2008, with the aim of tightening regulations on the unprincipled door-to-door sales and enhancing the liability of credit providers, which are promoting such sales. These amendments were deliberated in the Diet and were established in 2008.

     When a sales contract on purchase of product or service which is selling a quantity significantly exceeding the level ordinarily required for daily life is concluded in door-to-door sales, a purchasing party, etc. may cancel the contract––provided that this does not apply if any special circumstance that necessitates the conclusion of such contract exists for a purchasing party, etc. (Article 9-2 of the Law on Specified Commercial Transactions).

     A purchasing party, etc., may cancel any individual-type credit contract pertaining to the sales contract under Article 9-2 of the Law on Specified Commercial Transactions; provided, however, that this shall not apply if any special circumstance that necessitates the conclusion of such contract exists (Article 35-3-12 of the Installment Sales Law). The seller and the credit provider shall not be entitled to claim any penalty charges for the cancellation. The right to cancel the contract must be exercised within one year from the date of conclusion of contract.

     If an individual-type credit contract is concluded because of misconception caused by false representation or non-representation with regard to the product sales contract or credit contract, the sales contract as well as the credit contract may be cancelled (Article 35-3-13, etc.).

     An individual-type credit provider shall be obligated to submit credit contract document whenever an individual-type credit contract is concluded (Article 35-3-8). If an individual-type credit contract is used in the category of door-to-door sales, a cooling-off period shall apply to such contract together as well as the sales contract (Article 35-3-10).

     When concluding an individual-type credit contract in door-to-door sales, etc., an individual-type credit provider shall be obligated to examine the matters stipulated by ministerial ordinances with regard to the solicitation method for sales contract (Article 35-3-5 of the Installment Sales Law) and inappropriate credit contract shall be prohibited for the sales contract from unfair solicitation (Article 35-3-7). Any violation shall be subject to administrative punishment (Article 35-3-21).

     Additionally, the obligation of individual-type credit provider is stipulated by ministerial ordinances, which require that the credit provider take necessary measures for the conduct of appropriate business in view of knowledge, experience, and status of assets as well as purpose of contract with a purchasing party (Article 35-3-20). Any violation against this obligation shall also be subject to administrative punishment (Article 35-3-21).

     When concluding a credit contract, an individual-type credit provider shall be obligated to examine such matters stipulated by ministerial ordinances as “annual earnings, deposit and savings, credit obligations and other matters necessary for the calculation of amount that a purchasing party has capacity to pay individually” (Article 35-3-3 of the Installment Sales Law). Provided, however, that in certain cases, application of this obligation may be excluded by ministerial ordinance. “The amount that a purchasing party has capacity to pay individually means the annual amount which the party is able to pay without disposition of its resident, etc. stipulated by ministerial ordinances and without using living expenses stipulated by ministerial ordinances” (Article 35-3-3, Paragraph 2). Any conclusion of credit contract exceeding the amount that a purchasing party has capacity to pay individually is prohibited (Article 35-3-4).

(1) Abolishment of Designated Goods

     The Designated Goods and Services are abolished (each paragraph of Article 2 of the Law on Specified Commercial Transactions. The Designated Rights are maintained), and in principle any goods and services will be subject to the application as long as they are sold through the transactional forms of door-to-door sales, mail order sales, and telemarketing sales. Provided, however, that the Financial Instruments and Exchange Law, Law on Real Estate Transaction Business, Travel Agency Law, Lawyer Law and other areas stipulated by Cabinet order that recognize independent measures for consumer protection to be secured, are excluded from the application (Article 26).

(2) Prohibition on Further Solicitation toward Rejecting Customer

     As the regulations for beginning of door-to-door sales solicitation, the door-to-door seller shall try to confirm that the customer has the intention to receive the solicitation and that further solicitation toward any person who has rejected contract or solicitation shall be prohibited (Article 3-2 of the Law on Specified Commercial Transactions). This shall be subject to administrative regulations (Article 7).

(3) Prohibition on Transmission of Nuisance Advertising Email toward Customers without Prior Consent

     As a preventive measure against nuisance advertising email, transmission of advertising email toward any customer other than the customers who have given prior consent shall be prohibited (Article 12-3).

(4) Cancellation and Return of Goods in Mail Order Service

     If there is no indication that prohibits return of goods in advertisement of a mail order service, cancellation and return of goods may be permitted for eight days (Article 15-2).

(5) Introduction of Consumer Class Action

     Consumer class action, which was introduced into the Consumer Contract Law last year, is also introduced into the Law on Specified Commercial Transactions and the Law for Preventing Unjustifiable Extra or Unexpected Benefit and Misleading Representation (Amendment of the Consumer Contract Law). Violating acts such as Article 6 (Acts under application of penal provisions), Article 9 (Provision for cooling-off violation), Article 12 (False and misleading advertising, etc.) of the Law on Specified Commercial Transactions may be subject to consumer class action.

(1) Abolishment of Installment Requirement

     Previously, “installment payment after two months or longer and three or more installments” or “revolving payment” was the condition of application. This installment requirement is abolished for three-party credit (including individual-type and comprehensive-type) and one-time payment may also be the subject of the application if such payment is “the future payment to be made after two months or longer” (Article 2, Paragraphs 3 and 4 of the Installment Sales Law) in light of troubles about credit contract with lump-sum payment by bonus, etc. Accordingly, the term “solicitation for purchase by installments” is changed to “solicitation for purchase by credit”. On a side note, the installment requirement is maintained for independent-type installment sales (Article 2, Paragraph 1).

(2) Abolishment of Designated Goods

     In the same manner as the Law on Specified Commercial Transactions, the Designated Goods are abolished for credit purchase solicitation in the Installment Sales Law. The Designated Goods will be maintained for independent-type installment sales.

(3) Registration System and Administrative Regulations for Individual-Type Credit Provider

     The registration system is introduced for individual-type credit provider (Article 35-3-23 of the Installment Sales Law) and the order for improvement is stipulated (Article 35-3-21).

     The reason for this amendment is that, though previously a registration system was stipulated for credit card business, no registration system existed for individual-type credit providers, and that certain consumer finance providers factually entered into the credit business and caused damage to consumers, through collaboration with pernicious sellers.