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Consumer Affairs Agency

On September 1 2009, the Consumer Affairs Agency (CAA) was established as a new government agency. The CAA's main mission is to protect and enhance consumer rights and to aid them in exercising those rights.

The establishment of the CAA comes in response to criticism of the government for failing to address certain consumer-related issues. Prior to the CAA's establishment, the protection of consumer rights was handled independently by multiple government agencies, each addressing only those consumer rights affected by the laws enforced by that agency. Thus, each agency independently developed and enforced its own policy for the protection of those consumer rights affected by laws under its jurisdiction. Due to insufficient information sharing and coordination among these agencies, some consumer related issues were left unhandled by any agency and unaddressed by legislation.

The CAA is expected to integrate these fragmented consumer policies and eliminate gaps by overseeing all consumer related issues and making policies applicable to consumer affairs laws. Although enforcement of some laws affecting consumer rights remains under the control and authority of the respective ministries and government agencies, it has authority to consult with those ministries or agencies, request necessary information from them, give instructions and make recommendations to them regarding, among other things, policy and enforcement. It is also tasked with preparing legislation to protect consumer rights. The CAA oversees and monitors about 30 laws related to consumer rights, including those regulating the financial sector.

With financial laws, the CAA is newly empowered to oversee laws which restrict or affect consumer rights, while the Financial Services Agency (FSA) continues to maintain enforcement and governing authority. Some of the laws that the CAA monitors include the Money Lending Control Act that regulates the money lending business in Japan, the Financial Instruments Sales Act, and the Investment Act.

For example, regarding the Money Lending Control Act that regulates the money lending business in Japan, the CAA will now monitor regulations addressing the prohibition on providing fraudulent information and conclusive evaluations on uncertain matters, and the duty to provide material information. The CAA is also empowered to be involve in the enforcement procedure on violation of such regulation. The Money Lending Control Act authorises the FSA to issue orders to money lending businesses in violation of the act, requiring such businesses to improve the protection of its borrowers (which in many cases are consumers). The FSA is now required to consult with the CAA prior to the issue of such improvement orders. In addition, if the CAA independently decides that an improvement order is necessary, it may instruct or recommend the FSA to issue one.

The CAA will also monitor the Financial Instruments Sales Act, which imposes accountability requirements on dealers that sell financial instruments to consumers (deposit accounts, trusts, insurance or other financial products). Since one of the most important missions of the CAA is to unify consumer rights policies and address consumer related problems across sectors, the CAA will cover not only the Financial Instruments Sales Act but also the Consumer Contract Act and the Act on Specific Commercial Actions, as these three laws commonly regulate transactions between consumers and business entities. Because of its unique position as a cross-sectoral watchdog, the CAA is expected to make important proposals to harmonise and enhance the protection of consumers under these acts.

The Investment Act prohibits unauthorised entities from receiving contributions or deposits from the general public. Although this law aids in the regulation of certain illegal business practices, but regulations regarding illegal business practices are insufficient and some practices fall into the gaps between laws. The CAA is expected to eliminate the gaps between laws, which is one of the most important missions.

The impact of the CAA on the financial sector is unclear, but the provisions and the operations of the above-mentioned laws – the Money Lending Control Act, the Financial Instruments Sales Act, and Investment Act – will certainly be improved from a consumer protection perspective.

Mayu Yamaguchi

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