Advertising is a vital tool for any business to communicate its services and attract clients. However, in sensitive industries such as debt management and collection, the potential for misleading or exaggerated claims necessitates careful regulation to protect the public, ensure fair competition, and maintain the integrity of the sector. Japan's Act on Special Measures Concerning Business of Management and Collection of Claims (the "Servicer Law") incorporates specific provisions governing how licensed servicer companies (債権回収会社 - saiken kaishū kaisha) can advertise their business operations. These rules are designed to ensure that all promotional activities are truthful, non-deceptive, and uphold the professional standards expected of these regulated entities.

The primary legal basis for these advertising controls is found in Article 18, Paragraph 2 of the Servicer Law, with further detailed examples and prohibitions laid out in Rule 12 of the law's Implementing Regulations (施行規則 - shikō kisoku).

The Core Principle: Prohibition of False or Grossly Misleading Advertising (Servicer Law, Article 18, Paragraph 2)

Article 18, Paragraph 2 of the Servicer Law sets forth the fundamental principle governing servicer advertising. It states:
"A Servicer Company, with regard to its business, shall not, when advertising, make an indication that is significantly inconsistent with an objective fact or that is likely to cause people to make a gross misapprehension, nor shall it use any character that is likely to cause misunderstanding with regard to its business."
(「債権回収会社は、その業務に関して広告をするときは、著しく事実に相違する表示をし、又は著しく人を誤認させるような表示をしてはならない。」)
The official text further elaborates on not using characters likely to cause misunderstanding, which is also a key aspect.

This provision establishes a clear prohibition against two main types of problematic advertising:

1. "Indication significantly inconsistent with an objective fact" (著しく事実に相違する表示 - ichijirushiku jijitsu ni sōi suru hyōji): This refers to advertisements containing outright falsehoods, misstatements, or representations that can be objectively proven to be untrue. It targets clear factual inaccuracies.
2. "Indication likely to cause people to make a gross misapprehension" (著しく人を誤認させるような表示 - ichijirushiku hito o gonin saseru yōna hyōji): This covers advertisements that, while perhaps not containing literal falsehoods in every detail, are framed or presented in such a manner that they are highly likely to create a seriously mistaken understanding in the mind of an ordinary person (whether a potential client, such as an original creditor, or the general public, including debtors). The emphasis is on the misleading effect, even if subtle.
3. "Any character that is likely to cause misunderstanding with regard to its business": This is a broader safeguard against any advertising content—text, imagery, or overall presentation—that could confuse or mislead the public about the true nature, scope, limitations, or capabilities of the servicer's business operations.

The term "著しく" (ichijirushiku), meaning "significantly," "markedly," or "grossly," is important. The law is not aimed at policing minor, subjective "puffery" that might be common in general advertising, but rather at preventing substantial misrepresentations that could genuinely deceive or mislead.

Specific Prohibitions in Advertising Content (Implementing Regulations, Rule 12)

To give practical effect to the general principle in Article 18(2), Rule 12 of the Servicer Law Implementing Regulations provides concrete examples of prohibited advertising content. These serve as clear guidelines for what servicers must avoid:

1. Misrepresentation of the Scope of Handled Claims (Rule 12, Item 1 - 回収する債権の範囲に関する事項):
   Servicers must not advertise as if they are capable of handling, or are actually handling, types of claims that fall outside the legally defined scope of "Specified Monetary Claims" for which they are licensed. They also cannot falsely claim to handle specific types of Specified Monetary Claims if they do not, in practice, possess the capacity or intention to do so.
2. Misrepresentation Regarding Service Fees or Claim Purchase Prices (Rule 12, Item 2 - 受託手数料又は譲受代金に関する事項):
   Advertisements must not mislead potential clients (typically original creditors looking to entrust or sell claims) regarding the servicer's fee structure or valuation practices. Prohibited conduct includes:
   • Falsely claiming that their service fees for managing entrusted claims are "significantly lower" than those of competitors, or that their purchase prices for acquiring claims are "significantly higher," in a manner that is contrary to fact and designed to improperly induce business.
   • Using bait-and-switch tactics where advertised favorable terms are not genuinely available.
3. Misrepresentation of Financial Strength or Creditworthiness (Rule 12, Item 3 - 資力又は信用に関する事項):
   Servicers are prohibited from making false or misleading claims in their advertising about their own financial resources, stability, or credit standing. This includes:
   • Exaggerating their capital base or financial capacity.
   • Falsely suggesting a level of creditworthiness or financial backing that they do not possess.
   • The guidelines also caution against unfairly disparaging the financial standing or creditworthiness of competing servicer companies.
4. Misrepresentation Regarding Ancillary Business Approvals (Rule 12, Item 4 - 兼業の承認に関する事項):
   If a servicer company has not obtained the necessary approval from the Minister of Justice to conduct specific ancillary businesses (as permitted under Article 12 of the Servicer Law), it must not advertise as if it possesses such approval or is authorized to engage in those non-core activities.
5. Misrepresentation of Business Performance, Content, or Methods (Rule 12, Item 5 - 業務の実績、内容又は方法に関する事項):
   This is a broad category covering misleading claims about a servicer's track record and operational capabilities. Prohibited are advertisements that:
   • Make unsubstantiated or exaggerated claims about past collection success rates (e.g., "We guarantee recovery!").
   • Falsely assert that their collection methods, operational systems, or service content are significantly superior to those of competitors without objective basis.
   • Use client testimonials that are not genuine, are taken out of context, or are otherwise misleading.
6. Misrepresentation Regarding the Certainty of Collection (Implied by Article 18(2)'s general principle):
   Given the inherent uncertainties in debt collection, any advertisement that implies or guarantees that the collection of any specific claim or portfolio is certain or virtually assured would be considered grossly misleading.

The Rationale Behind These Strict Advertising Regulations

The Servicer Law's detailed control over advertising practices is driven by several important policy objectives:

• Protecting Potential Clients (Original Creditors): The primary audience for much of servicer advertising consists of financial institutions, corporations, or other entities looking to outsource the management of, or sell, their non-performing or distressed claims. The regulations ensure these potential clients are not deceived by false promises regarding a servicer's fees, purchase prices, capabilities, or track record, allowing them to make informed decisions.
• Protecting Debtors and the General Public: While debtors are not the primary target of servicer business development advertising, they are exposed to the servicer's identity and communications during the collection process. Misleading advertising about a servicer's authority, methods, or the consequences of non-payment could cause undue fear, anxiety, or pressure on debtors. Ensuring truthful advertising contributes to a more transparent and less intimidating environment for debtors.
• Maintaining Public Trust and Industry Integrity: The credibility of the entire licensed servicer industry relies on its members adhering to high ethical and professional standards. Truthful and responsible advertising is a key component of this. Preventing misleading claims helps distinguish licensed, regulated servicers from any unregulated or less scrupulous actors.
• Ensuring Fair Competition: The rules aim to create a level playing field where servicers compete based on the genuine quality and value of their services, rather than on deceptive marketing tactics or exaggerated claims.

Supervisory Oversight and Enforcement Mechanisms

The Ministry of Justice is responsible for overseeing compliance with these advertising regulations as part of its broader supervision of the servicer industry. Mechanisms for enforcement include:

• Monitoring: The Ministry may monitor servicer advertisements, websites, and promotional materials.
• Complaint Investigations: Complaints about misleading advertising can be lodged by competitors, clients, consumer protection agencies, or members of the public, triggering investigations by the Ministry.
• Administrative Sanctions: If a servicer is found to have violated the advertising regulations, the Ministry of Justice can impose a range of administrative sanctions, including:
  • Guidance or Warnings (指導・警告 - shidō/keikoku): For less severe or first-time offenses.
  • Business Improvement Orders (業務改善命令 - gyōmu kaizen meirei): Requiring the servicer to take specific corrective actions, such as retracting misleading advertisements and implementing stricter internal review processes for future marketing materials.
  • More Severe Sanctions: In cases of repeated, deliberate, or particularly egregious violations that demonstrate a disregard for the law, more severe sanctions, potentially including business suspension orders or even license revocation in extreme circumstances, could theoretically be applied, especially if the misleading advertising is part of a broader pattern of non-compliant or unethical behavior.

It's also important to note that these specific Servicer Law provisions operate alongside Japan's general laws concerning fair advertising and consumer protection, such as the Act against Unjustifiable Premiums and Misleading Representations (不当景品類及び不当表示防止法 - Futō Keihinrui oyobi Futō Hyōji Bōshi Hō), which provides broader prohibitions against misleading advertising across all industries.

Implications for U.S. Businesses

For U.S. companies and investors interacting with the Japanese market, these advertising regulations have practical relevance:

• Evaluating Potential Servicer Partners (for Creditors/Investors): When U.S. entities are considering entrusting claims to or investing in portfolios managed by a Japanese servicer, being aware of these advertising rules can aid in a critical assessment of the servicer's marketing materials and public statements. Unrealistic guarantees, overly aggressive claims about success rates, or unclear statements about fees should be treated as potential red flags deserving further scrutiny.
• Establishing Servicer Operations in Japan: U.S. companies planning to establish a licensed servicer subsidiary in Japan must ensure that all their marketing and promotional activities within Japan strictly adhere to these legal requirements from day one. This includes training marketing staff and implementing internal review processes for all advertising content.
• Understanding Market Professionalism: Awareness that the promotional activities of this sector are subject to specific legal controls provides a degree of confidence in the maturity and regulated nature of the Japanese debt servicing market.

Conclusion

The advertising regulations within Japan's Servicer Law are a vital component of its comprehensive framework aimed at ensuring that licensed servicer companies conduct their business with transparency, honesty, and professionalism. By prohibiting false, exaggerated, or misleading claims, these rules protect potential clients from being deceived, prevent undue pressure on debtors, promote fair competition, and ultimately uphold the public trust in this specialized and sensitive industry. For all participants in the Japanese credit and distressed asset markets, these regulations contribute to a more predictable and reliable operational environment.