When individuals or businesses face overwhelming debt, they have the right to seek legal counsel and explore formal legal avenues for resolution, such as bankruptcy, civil rehabilitation, or other debt adjustment procedures. In Japan, when a debtor takes such significant steps, it fundamentally alters the landscape of how licensed servicer companies (債権回収会社 - saiken kaishū kaisha) can interact with them regarding the collection of "Specified Monetary Claims." The Act on Special Measures Concerning Business of Management and Collection of Claims (the "Servicer Law") includes a crucial provision—Article 18, Paragraph 8—that specifically restricts direct contact by servicers once these formal processes are initiated and proper notice is given.

This regulation is vital for ensuring that debtors can pursue legal remedies without undue interference or pressure, and it channels communications through appropriate legal or court-supervised pathways.

The Core Restriction: Limited Contact After Formal Legal Steps (Servicer Law, Article 18, Paragraph 8)

Article 18, Paragraph 8 of the Servicer Law outlines the specific circumstances under which a servicer's direct contact with a debtor for the purpose of demanding payment must cease. The provision states:

"A Servicer Company (this includes persons entrusted by a Servicer Company with its business... and persons who engage in the business of a Servicer Company) shall not, with respect to a Specified Monetary Claim it handles, without a justifiable reason, visit or telephone the Debtor, etc. to demand performance of the obligation, after the Debtor, etc. has (i) entrusted an attorney, a legal professional corporation, a judicial scrivener, or a judicial scrivener corporation with the necessary procedures for the adjustment of the obligation..., or (ii) has taken the necessary procedures for bankruptcy, civil rehabilitation, corporate reorganization, special liquidation, specified conciliation, or other similar court procedures for the adjustment of the obligation..., and (iii) has given notice thereof to the Servicer Company by a document or by any other means specified by Ministry of Justice Ordinance."
(「債権回収会社（…受託者…及び…従業者を含む。）は、その取り扱う特定金銭債権につき、債務者等が債務の整理のため必要な裁判上又は裁判外の手続（…弁護士若しくは弁護士法人又は司法書士若しくは司法書士法人（…）に委託した場合…を含む。）をとり、かつ、その旨を債権回収会社に対して書面その他の法務省令で定める方法により通知したときは、正当な理由がないのに、債務者等に対し、訪問し又は電話をかけて、当該債務を弁済することを要求してはならない。」)

Let's break down the key triggers and the nature of this restriction:

Triggers for Restricted Contact:

1. Engagement of Legal Professionals for Debt Adjustment (債務の整理 - saimu no seiri):
   The restriction applies if the "Debtor, etc." (which includes the principal debtor and any guarantors covered by the arrangement) has formally entrusted the necessary procedures for adjusting their obligations to:
   • An attorney (弁護士 - bengoshi) or a legal professional corporation (弁護士法人 - bengoshi hōjin).
   • A judicial scrivener (司法書士 - shihō shoshi) or a judicial scrivener corporation (司法書士法人 - shihō shoshi hōjin). It's important to note that judicial scriveners in Japan have a more limited scope of practice in debt adjustment matters compared to attorneys, typically handling cases below certain monetary thresholds or specific types of procedures.
     This act of entrustment signifies that the debtor is now formally represented by a legal professional for the purpose of resolving their debts.
2. Initiation of Formal Court Procedures for Debt Adjustment:
   The restriction also applies if the Debtor, etc., has initiated necessary court procedures aimed at adjusting their obligations. The law explicitly mentions:
   • Bankruptcy proceedings (破産 - hasan).
   • Civil Rehabilitation proceedings (民事再生 - minji saisei).
   • Corporate Reorganization proceedings (会社更生 - kaisha kōsei).
   • Special Liquidation proceedings (特別清算 - tokubetsu seisan).
   • Specified Conciliation proceedings (特定調停 - tokutei chōtei).
   • The law also includes "other similar court procedures for the adjustment of the obligation," allowing for some flexibility to cover other recognized legal debt resolution mechanisms.
3. Notification to the Servicer Company:
   Crucially, for the prohibition on direct contact to take effect, the servicer company must have been notified of the debtor's actions (i.e., engagement of legal counsel or initiation of court proceedings). The law specifies that this notice must be given "by a document or by any other means specified by Ministry of Justice Ordinance" (書面その他の法務省令で定める方法 - shomen sonota no Hōmu Shōrei de sadameru hōhō).
   In practice, this notification is most commonly done through a formal written "Notice of Intervention" (受任通知 - junin tsūchi) sent by the debtor's attorney or judicial scrivener to all known creditors and servicers. This notice typically informs the recipient that the legal professional has been retained to handle the debtor's affairs and usually instructs that all future communications regarding the debt be directed exclusively to them.

The Nature of the Prohibition:

Once these conditions are met (legal action/representation + notification), the servicer company (including its employees and any agents acting on its behalf) "shall not, without a justifiable reason (正当な理由がないのに - seitō na riyū ga nai no ni):"

• Visit the Debtor, etc.
• Telephone the Debtor, etc.
• For the specific purpose of demanding performance of the obligation (i.e., demanding payment).

This means that direct demands for payment via visits or phone calls to the debtor must generally cease. The primary channel for communication regarding the substance of the debt and its repayment should shift to the debtor's appointed legal representative or be conducted through the formal framework of the court proceedings.

The Narrow Exception: "Justifiable Reason" for Direct Contact

The phrase "without a justifiable reason" implies that there could be exceptionally limited circumstances where direct contact with the debtor for payment demands might still be permissible. However, this exception is construed very narrowly.

It would not typically be considered a "justifiable reason" for a servicer to directly contact a notified debtor for payment simply because:

• The servicer wishes to expedite collection.
• The servicer disagrees with the debtor's decision to seek legal assistance or file for a court procedure.
• The legal representative is perceived as being slow to respond (unless all reasonable efforts to communicate via the representative have failed over a significant period for urgent matters).

What might constitute a "justifiable reason" is not exhaustively defined and would be highly fact-dependent. The commentary within legal guides often suggests that such reasons are rare. They might theoretically include:

• Situations where, despite the notice of intervention, the legal representative becomes entirely uncontactable after repeated, documented attempts by the servicer to discuss urgent and time-sensitive matters that cannot be reasonably deferred or handled otherwise.
• If the debtor's legal representative explicitly consents to direct communication between the servicer and the debtor for a very specific, limited purpose and duration.
• If the debtor, despite having legal representation, initiates direct contact with the servicer to discuss payment. Even in this scenario, servicers are generally advised to exercise extreme caution and, where appropriate, reiterate that communications should ideally go through the legal representative.

The critical point is that the burden would be on the servicer to demonstrate the existence of a truly compelling and legitimate "justifiable reason" if they choose to bypass the debtor's legal counsel or ignore ongoing court proceedings to make direct payment demands. In almost all standard scenarios, such direct demands are to be suspended.

The Significance of Formal Notification

The trigger for the restriction on direct contact is the servicer's receipt of notice that the debtor has engaged counsel or initiated legal proceedings. This underscores the importance of the formal notification process.

Attorneys and judicial scriveners in Japan, upon being retained for debt adjustment matters, routinely send a junin tsūchi to all known creditors and their servicers. This notice serves as the official communication that activates the protections and procedural changes mandated by laws like Article 18, Paragraph 8 of the Servicer Law. Failure by a debtor or their representative to properly notify a servicer could inadvertently delay the activation of these contact restrictions for that particular servicer.

Scope of "Debtor, etc." (債務者等 - saimusha tō)

The term "Debtor, etc." as used in this provision typically refers to the principal debtor(s) and any guarantors or co-obligors who are explicitly covered by the legal representation or are parties to the specific court proceedings that have been initiated. If, for example, a principal debtor files for bankruptcy and notifies the servicer, but a guarantor for that same debt has not taken similar legal action or engaged their own counsel, the servicer's ability to contact that guarantor might be assessed under the general conduct rules (e.g., Article 17 against harassment) rather than the specific prohibition of Article 18(8) which is triggered by the guarantor's own legal action or representation notice.

Purpose and Rationale of the Restriction

This rule serves several important functions within the Japanese debt resolution framework:

1. Protecting the Debtor's Right to Counsel and Due Process: It ensures that once a debtor has formally sought legal assistance or availed themselves of legal procedures for debt relief, they are not subjected to continued direct collection pressure from servicers. This allows them to work with their legal representative or navigate the court system without interference that could undermine their position or ability to achieve an orderly resolution.
2. Facilitating Orderly Debt Adjustment: By channeling communications regarding the debt through a single, designated point of contact (the legal representative) or through the structured environment of court proceedings, the process becomes more organized and efficient. It reduces the likelihood of miscommunications, conflicting information, or parallel negotiations that could complicate debt workouts, bankruptcies, or rehabilitation plans.
3. Preventing Undue Influence or Harassment: Debtors who have taken formal legal steps are often in a vulnerable financial and emotional state. This rule protects them from direct demands that could be perceived as intimidating, confusing, or an attempt to circumvent their legal representation.
4. Respecting the Role of Legal Professionals: The provision acknowledges and respects the crucial role that attorneys and judicial scriveners play in representing debtors' interests and facilitating structured solutions to debt problems.

Consequences of Non-Compliance

Violating the contact restrictions outlined in Article 18, Paragraph 8 can lead to significant negative consequences for a servicer company:

• Breach of the Servicer Law: It is a direct violation of a specific conduct regulation.
• Administrative Sanctions: The Ministry of Justice can issue administrative sanctions, such as business improvement orders, or potentially more severe actions for repeated or flagrant violations.
• Reputational Damage: Failure to respect a debtor's engagement of legal counsel can be viewed as unethical and unprofessional, harming the servicer's standing.
• Complaints to Professional Bodies: If a servicer improperly bypasses a debtor's attorney, the attorney might consider filing a complaint, further complicating matters for the servicer.

Implications for U.S. Businesses

For U.S. entities, this Japanese regulation has several relevant implications:

• Creditors Using Japanese Servicers: U.S. creditors should ensure that their Japanese servicer partners are fully aware of and strictly adhere to this rule. Any action by a servicer that improperly contacts a represented debtor could create legal issues for the collection process and potentially reflect poorly on the original creditor if they are perceived as condoning or encouraging such behavior.
• Investors in Japanese NPLs or Servicer Companies: This is an important operational compliance point for servicer companies. Investors should consider whether a servicer has robust internal systems and training to identify accounts where a junin tsūchi or notice of legal proceedings has been received, and to ensure that their collection staff immediately cease direct payment demands and adjust communication protocols accordingly.
• U.S. Companies or Subsidiaries as Debtors in Japan: If a U.S. company's Japanese subsidiary or affiliate engages legal counsel for debt restructuring or enters formal insolvency proceedings in Japan, it is crucial that their legal representative promptly and formally notifies all relevant creditors and their servicers. This act of notification will trigger the protections afforded under Article 18, Paragraph 8, shielding them from direct demands for payment.

Conclusion

The restriction under Article 18, Paragraph 8 of Japan's Servicer Law on direct servicer contact with debtors who have initiated formal legal action or engaged legal representation is a critical safeguard. It upholds the principles of due process, facilitates orderly debt resolution, and protects vulnerable debtors from undue pressure. This rule mandates a shift in communication strategy by servicers, requiring them to respect the debtor's choice to navigate their financial difficulties through established legal channels and primarily interact with their designated legal representatives or through the formal court system once notified. Adherence to this provision is a hallmark of a compliant and professional servicer operating in Japan.