Charter of the Loan Servicers Association of Japan

February 25, 2009
The Loan Servicers Association of Japan

Current as of June 30, 2008, in the tenth year since the launch of the servicer system, there are currently over 100 servicer companies that have handled claims of 238 trillion yen and recovered 26.2 trillion yen. During this period, servicer companies have facilitated the disposal of bad loans of financial institutions due to the collapse of the bubble economy and greatly contributed to overcoming the financial crisis. They furthermore play a key function in supporting the corporate revitalization of general businesses and diversification of fund procurement, such as by supporting the recovery of the small to medium size enterprises that bolster the regional economies, and providing servicing for cases of asset liquidation and securitization.

Meanwhile, various criticisms have recently been made concerning the collection activities of servicer companies.
Although not for reason of violating conduct controls, a servicer company had its claim management and collection license revoked in March 2008, causing great damage to the credibility of the servicer system. The servicer industry must urgently obtain the trust of the nation, secure the appropriate operation of servicer company business, and enhance its compliance system.
The Servicer Act amendment bill continues to be deliberated in the lower house and has not yet reached enactment, and the situation is such that the nation's insufficient trust in the servicer system can only be said to be a large factor in this.

Established on October 16, 2000, the Loan Servicers Association of Japan, a private organization, engages in projects, such as providing various forms of training and certification examination on compliance and operations for servicers, and the publication of books on the subject. In September 2008 it established a complaint and consultation service and is working to restore the health of the servicer industry and obtain the trust of the nation. However, with over 100 companies of diverse business models, the situation is such that it is essential to strengthen the functions and enhance the organizational structure and personnel system of the current Loan Servicers Association of Japan in order to ensure the business propriety of the expanding servicer company industry and to enhance the compliance system. Furthermore, Article 19-2 to Article 19-4 of the bill to amend the Servicer Act stipulate an "organization comprising claim management and collection companies," which is required to "perform the activities necessary to support the preparation of business standards to which claim management and collection companies and other entities engaging in such business should comply, ensure the proper operation of other business of claim management and collection companies, and publish the status of such activities." This indicates that the functional enhancement of the private organization, the Loan Servicers Association of Japan, is not only demanded by society but is likely to become a legal obligation.

In order to respond to the social demand to secure the trust of the nation in the servicer system and to prepare for the adoption of the bill to amend the Servicer Act, the Loan Servicers Association of Japan, a private organization, shall be incorporated to establish the General Incorporated Association Loan Servicers Association of Japan.