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Fight club: Bengoshi Kaikan in Hibiya

It wasn’t long ago that the law was a lonely profession in Japan, though the number of attorneys may have only seemed small in comparison with the United States, where litigation is practically a spectator sport. Apparently, that’s no longer the case, according to a recent article in Tokyo Shimbun, which says that there is a glut of lawyers in the major cities. Consequently, many are branching out to smaller cities and even the countryside to find clients. The article profiles one young attorney who opened an office in Tokyo two years ago and has had scant business ever since, so in the past year he has held seven free sodankai (consulting sessions) in Hokkaido — six in Sapporo and one in Obihiro. The Hokkaido Bar Association says that such sessions are a burgeoning trend that started three years ago.

According to a government white paper on the legal profession, there are now 15,000 lawyers practicing in Tokyo, a 70 percent increase over the last ten years. And if you include the surrounding prefectures of Kanagawa, Saitama and Chiba, the number practicing in the Tokyo Metropolitan Area tops 32,000, which is more than half of all the lawyers in Japan.

An earlier white paper released in 2008 charts the steady rise of legal professionals in Japan. From 1989 to 1995, the ranks of attorneys added only about 200 new people a year, and after 1995 the number increased gradually until 2001, when the number leaped to 1,117. In 2008, more than 4,000 passed their examinations to become lawyers. Around the turn of the century, the business world demanded more legal experts, saying that trials, especially civil court cases involving commercial matters, took too long. As a result, more law schools were set up, but the demand never materialized on the scale predicted. Between 2000 and 2008, the number of civil suits handled by district courts in Japan increased by only 0.5 percent, though the overall number of lawyers went up by 62 percent. As a result, the number of cases handled per attorney dropped by 21.7 percent, though the attendant loss of income wasn’t quite as steep. The average yearly pay for a lawyer in 2004 was ¥16.5 million and in 2008 was slightly less than ¥16 million.

The profession received a much needed boost in 2006 when the Consumer Credit Law was revised with regard to “gray area” rates (kinri) and consumer credit companies were forced to refund ¥1.6 trillion in overcharged interest. About 70 percent of the customers eligible for the refunds hired lawyers and notaries to the tune of ¥40 billion, and somewhere between 20 and 30 percent of all the lawyers in Japan have so far benefited from this windfall.

Since most of the nation’s lawyers are in Tokyo or Osaka and the consumer loan-related bankruptcy business in those areas has dried up, they are looking farther afield. One Tokyo law office, Adire, which advertises extensively on television, has already set up offices in Sapporo, Hakodate, Obihiro and Kushiro. Most law offices looking to expand in this way hire advertising agencies, which research regional municipalities and set up the consulting sessions that alert locals to the availability of legal services. A president of one ad agency told Tokyo Shimbun that big city lawyers sometimes have an edge over locals in smaller towns, because people don’t know them. It’s sometimes difficult for locally based attorneys to get business, especially with regard to bankruptcies, because potential clients are also neighbors who would prefer that the community not know anything about certain aspects of their business.

But of course, local lawyers resent these city slickers invading their bailiwicks. A representative of a consumer protection committee in Sapporo told Tokyo Shimbun that since there are no regulations limiting where a lawyer can practice, most stay in Tokyo and do their distant business online or by phone, which means they can’t always help clients in emergencies. Conversely, some of the city lawyers say they are suddenly faced with much bigger travel costs, but assume that increased revenues will justify the added expense, thus implying that until a lawyer shows up in your town you probably never thought you needed one.

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Notice at loan ATM indicating new rules related to proof of income

In December 2006 the government revised the law for consumer loans making it more difficult for certain people to borrow cash and reducing the amount of interest moneylenders could charge. Over the past 3½ years the law went into effect in stages, and as a result a number of consumer loan companies went out of business, since many were forced to pay back excessive interest they had charged their customers in the past. The main aim of the law is to curtail the occurrence of spiraling debt spread out among multiple companies.

Last month the last element of the revised law went into effect. From now on, a customer will not be able to borrow more than the equivalent of one-third of his or her annual income, and will have to submit documentation as proof of income. Though the law was conceived to save people from crushing debt, it may effectively drive more people to bankruptcy or to underground loan sharks.

Unfortunately, a lot of people don’t seem to know about the law. According to the Mainichi Shimbun, the Financial Services Agency found that less than 50 percent of the people it asked had ever even heard about the new law.

Housewives make up a good portion of consumer loan customers, and it seems they will be shut out of the system because of the new rules. Many housewives turn to consumer loan companies to pay the monthly bills when their husbands’ paychecks aren’t enough, and a good portion of them will not be able to borrow any more money from now on. The main reason is that they do not have jobs themselves and so have to submit their husband’s employment information. However, in many cases the husbands don’t even know their wives are borrowing money and the wives don’t want them to know. Even if they did get their husband’s information, because of the one-third limitation, they may not be able to borrow what they need. Much of the money that these women borrowed from consumer credit companies was used to pay off credit card debt.

The moneylenders industry association, Japan Financial Services Association, surveyed 4,000 customers in 2009 and found that half of them had debts that exceeded one-third of their annual income. It also estimates that there were 14.2 million people with outstanding loans at consumer credit companies, such as Acom, Promise and Aiful, when the law went into full effect June 1, and that about 4.9 million are housewives. (Many others are small businesses, which also rely on consumer credit to keep their companies operating on a daily basis.)

In addition, 85 percent of existing consumer loan companies have said they will no longer cater to housewives because the cost of developing systems that can handle their special needs under the revised law is prohibitive. A survey of 500 housewives conducted by JFSA found that 37 percent “know something” about the revised law, and the rest either “don’t know” about it or “don’t understand” what it means.

Josei Jiritsu no Kai (Women’s Independence Group) and other non-profit organizations have set up services to help these women who are now stuck with multiple debts and no way to refinance them, but the main problem right now is getting the word out. Though the government revised the law it didn’t take into consideration publicizing the fact and giving people enough time to prepare for the change. The JFSA, realizing the government’s neglect, started running TV commercials and other advertisements last month, but they may be too little too late. It’s likely that in the near future the personal bankruptcy rate will skyrocket, not to mention the divorce rate.

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