Asahi Shimbun 4/11/2007(one of the 3 biggest newspapers in Japan.)

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日本語版(Japanese edition)


Compensation for 'loan victim' - responsibility of banks as creditors
by Atsushi Yamada

'I would rather jump from the roof and commit suicide if our home is taken away,' said Mrs. A, nearly 90 years old, who will possibly be evicted from her own home before the New Year. Her home in Tokyo, is mortgaged to Mizuho Bank who has decided to sell it by auction.
‘Your house and land is worth 800 million yen. Unless you take preventative measures against inheritance tax, the house and land will have to be sold to pay the government.’ 20 years ago, a sales representative from Daiichi Kangyo Bank, which has merged to today’s Mizuho Bank, frequently visited Mrs A. He asserted that she should borrow money to buy property and / or investment in financial products to keep her home. She accepted a loan of 190 million yen based on the advice from the sales representative. Such large scale loans were later abolished, as these were said to have encouraged the financial ‘bubble’ experienced in Japan in the late 1980’s.

Mrs. A’s son and his wife, who also live in the family home, signed as joint guarantors. Following the recommendation of the bank, they purchased a flat as well as a variable life insurance policy. However, the income from the rent of the flat was not enough to cover the interest payments on the loan. ‘We have tried to raise the money every month and paid nearly 140 million yen. Nevertheless, the loan amount has not been reduced.’ The local branch manager who was in charge of this case was a friend of Mrs. A’s son and his wife from university. He had just been assigned to the new local office and used his connections for business opportunities. He is now retired and says ‘We worked very hard, in all good faith for our clients. The outcome was, unfortunately, a severe one, but the A family is after all responsible for their own decisions.’ Mr. A, is well aware of their responsibility to make the loan payments. However, the situation is unbearable. He wrote to Seiji Sugiyama, the Head of the Bank and said: ‘You have made a loan to my mother which is 320 times the amount of her annual income as a pensioner, without fully explaining all the risks. Once circumstances changed, you are telling us that we should give up our home, even though my mother is still alive and that the bank said the loan was in fact a measure against inheritance tax. We will be evicted from our home with no money left. Doesn’t it ever cross your mind about your responsibility as a lender? ‘
As a reply to this letter, the bank said they are ready for discussion, but are still asking for repayment of the loan and the A family’s home is still listed for auction.

The subprime loan crisis in the USA was also caused by excessive financing by banks which was done without considering the debtors’ financial ability. Along with pursuing creditor’s responsibility, the US government also provided financial support for both banks and debtors. Measures to strengthen financial regulations are also being considered. In Japan, the importance of maintaining trust and discipline was underlined and banks were rescued by public resources. Mizuho Group has completed its repayment to the public fund and decided to pay retirement allowances to all their former senior managers. Meanwhile, a million ‘victims’ of this type of loan have been neglected. Gou Egami, an author and former manager of Daiichi Kangyo Bank says : ‘If banks are really reflecting on their own mistakes, they should compensate their customers for what they have suffered.’

Although the Financial Instruments and Exchange Law to protect debtors has come into effect, bank loans are not yet covered.. Lenders’ liability is still unclear and consumers’ rights are still left in the dark.