Outline of Amendment to Door-to-Door Sales and Other Direct Sales Law and Installment Sales Law (Draft)

March 4, 1999
Ministry of International Trade and Industry

1. Purpose of the Amendment

In recent years, consumers' troubles are rapidly increasing with service contracts for esthetic salons, foreign language conversation classes, etc. (so-called "continuous service contracts"). Because of skillful sales talks and soliciting by sales representatives, consumers sign the contracts without fully understanding the contract terms or they face difficulty in canceling the contracts during the contract period.

These troubles occur mainly because consumers are not allowed to cancel the contracts even in the event of a change in their living conditions such as becoming ill or relocating their residence, although making much payment for long-term service in advance.

In the current legal system, call-sales are treated under Door-to-Door Sales and Other Direct Sales Law, but there are no adequate laws established for other forms of sales, and voluntary restrictions by industry groups do not have enough effect either.

Considering the current situation, adequate measures are necessary for closing and canceling contracts and for effectively resolving the troubles with these unique forms of contracts.

(Number of complaints with 4 business categories that provide "Continuous Services")

The number of complaints with 4 business categories has been rapidly increasing in recent years. The total number of complaints has exceeded 13,000 cases in FY 1997. The seriousness of these problems is reaching the level of complaints concerning consumer finance and multilevel merchandising.

Number of complaints of 4 business categories

	E	FL	CS	HT	Total
FY 1995	5,277	1,814	657	875	8,623
FY 1996	6,993	2,355	895	1,278	11,521
FY 1997	8,058	2,763	1,010	1,784	13,615

Esthetic (E); Foreign language conversation classes (FL);
Cram school (CS);Home tutor dispatching services (HT)
(Source: Japan Consumer Information Center)

(Contents of complaints)
Approximately 70% of the complaints are regarding the cancellation of contracts.

2. Outline of the Bill

(1) Amendment to the law regarding call-sales ("Door-to-Door Sales and Other Direct Sales Law")

1) The following measures will be taken for long term continuous services contracts of "Specific continuous service offers" including esthetic salons, foreign language conversation classes, etc.

- Oblige service providers to disclose information by issuing written documents

- Prohibit any actions that threaten or confuse consumers

-Give consumers the "Cooling Off" right that allows consumers to cancel purchases without penalty during the cooling-off period, and the contract cancellation right during the contract period, etc.

2) The following measures will be taken to ensure the effectiveness of the current system.

- Increase the fine and impose a heavier penalty to corporations which do not adhere to the current system.

(2) Amendment to the Installment Sales Law

1) The following measures will be taken by including services provided through "Specific continuous service offers" in the subject to the Installment Sales Law and to properly adjust the transactions for which consumers pay by credit arrangements.

- Oblige the service providers to disclose information by issuing written documents

- Limit the amount of compensation for damage

- Make connection to the defense right concerning the installment sales service.

2) Other necessary measures will also be taken.