Disputes over purchased accounts receivable

1. Checking the claim or inquiry and the state of the transactions

Sorting out unremitted collections, refusals to pay and assertions of illegality

We sort the communications received, together with the records of funds received, into four categories: (1) collections not remitted by the user company, (2) non-payment or refusal to pay by the account debtor, (3) demands for the return of money from the user company, and (4) inquiries from an authority. We then list the deadlines for replying, paying or taking procedural steps. Where more than one category applies, we bring together the assertions and the materials relating to the same transaction.

For unremitted collections, we check where the money was paid and what the remittance obligation was; for non-payment or refusal to pay, the account debtor's assertions and the record of payment; for demands for the return of money, the transactions concerned and the basis of calculation; and for inquiries from an authority, the facts and materials requested. Whichever the entry point, we compare the contracts against the history of demands and payments, and check who in practice bore the burden when the account debtor did not pay.

Deadlines are managed from this stage. If a complaint has been served there is a deadline for filing a written answer; an inquiry from an authority has a deadline for replying; a demand for the return of money carries whatever deadline the other side has set. These will not wait for the internal fact-finding to finish. In parallel with the fact-finding, we decide the minimum that has to be done for each deadline.

Comparing the master agreement, the individual agreements and the invoices with the transactions as carried out

We collect not only copies of the contracts but the documents for each individual transaction, the records of offer and acceptance, the credit assessment materials, the remittance records, and the history of demands and receipts. Where there are several versions of the contract, we identify in particular which version the transactions in question were made under.

Three sets of correspondences are compared: the terms written in the contract against the terms actually applied; the receivables said to have been purchased against the materials supporting the fact that those receivables arose; and the method of collection that was contemplated against the method of collection actually used. Where there is a divergence in any of the three, that divergence itself becomes a point in dispute later.

Checking that the receivable arose, what remains outstanding, where payment was made and who is involved

For the receivables purchased, we check whether the transaction that gave rise to them actually exists. It is possible to find that an invoice exists but there is nothing to support delivery or the provision of services, or that the account debtor denies that the transaction took place. In that case two problems arise at once: the non-existence of the receivable, and a false statement by the user company.

As to the amount outstanding, we check the figure at the time of purchase against the current figure. Where partial payment, a price reduction, a return of goods or a set-off is asserted, we check the materials supporting each.

Preserving records and deciding the order in which to contact the user company and the account debtor

Once a dispute arises, we begin preserving evidence. The contracts, the credit assessment materials, internal approval records, exchanges between the staff handling the matter and the user company, telephone and messaging histories, and records of money in and out. Exchanges left on the personal devices of individual staff are, in particular, both easily lost and important as material showing how the business was actually run.

The order of contact is also considered. Contact with the account debtor is made only after checking who holds the receivable and what notices have been given. Making a demand on the account debtor without sufficient checking can affect the trading relationship between the account debtor and the user company, and can make collection itself more difficult.

Where it is said that the same receivable has been assigned to another company as well, we treat this as a question of multiple assignments, check the payments already made and the respective rights, and consider the approach to contact and to making demands.

Where misconduct by the purchasing company's own officers or employees, or misappropriation of collections, is suspected, see the guide on responding to internal misconduct and corporate misconduct.

2. Considering whether the transaction is a sale of receivables or a loan, from how it was actually conducted

What this chapter deals with is not what form of contract would avoid being a loan. It is how transactions that have already taken place may be assessed, by comparing the contracts against the demands made and the payments made in practice.

Checking who bears the risk of non-collection and the terms on repurchase and recourse

The Money Lending Business Act defines the money lending business as the business of lending money, or acting as an intermediary for the lending or borrowing of money, carried out as a business, and provides that this includes the provision of money, or intermediation for it, by means of the discounting of bills, a sale by way of security or other similar methods. In other words, the fact that the contract is called a sale does not by itself determine the answer.

What is therefore checked, in addition to the wording of the contract, is where the burden actually fell. Alongside the heading and wording of any repurchase provision, we check from the records of demands and payments who bore what burden when the account debtor did not pay.

The matters checked include, for example, the following. Were there cases in which the account debtor in fact did not pay? If so, what did the purchasing company do? Did it require the user company to repurchase, and if so on what basis? Were there cases in which it did not do so and absorbed the loss? Where cases were treated differently, why were they treated differently?

Examining how funds were actually provided and collected and how extensions of time were handled

We also check how funds were provided and collected in practice. When and how was the purchase price paid? Was part of it held back as a retention or a deposit? When was the amount held back returned? Was collection made by receiving payment directly from the account debtor, or by the user company receiving it and remitting it on?

We check how extensions of time were handled. Where the user company was unable to remit by the due date, were there cases in which it was given more time? Was any additional money taken when time was given? Under what heading was that money received? Were any cases handled by treating the matter as a further purchase?

All of these are facts that show how the business was actually conducted. Where the practice diverged from the wording of the contract, the response is considered with that divergence in view.

Considering registration under the money lending legislation and the rules on interest and fees

Where a transaction is assessed as a loan, several sets of rules become relevant.

One concerns registration. The Money Lending Business Act requires a person who intends to carry on the money lending business to be registered. Where the business was carried on without registration, that in itself is a problem.

Another concerns interest. The Interest Rate Restriction Act provides that, where the interest agreed under a loan for consumption of money exceeds the amount calculated at the prescribed rate, the excess is void. Separate provisions govern the calculation of the principal amount for a loan for consumption of money made in the course of business. The Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates also provides for criminal penalties where a person who lends money enters into an agreement for interest exceeding a specified rate.

What requires consideration here is the treatment of money received as a fee. The Interest Rate Restriction Act provides that, in relation to a loan for consumption of money, money other than principal that the creditor receives is deemed to be interest, whatever name it is given — a premium, a discount charge, a fee, an examination charge or anything else. For a loan for consumption of money made in the course of business, the costs excepted from this treatment are also limited. It therefore cannot be said that money falls outside this treatment merely because it was not calculated by reference to a period of time. In addition to the heading under which money was received, the method of calculation and its relationship to time, we check what the difference between the amount provided and the amount to be returned is consideration for.

The consequences in civil law may go beyond the voidness of the interest above the limit. A contract that meets the statutory requirements relating to a high rate of interest is void in its entirety, and further, where the lending is assessed as contrary to public morals, a claim for the return of the principal provided may not be allowed. In responding to a demand for the return of money, we check not only the recalculation of interest but the validity of the contract as a whole, whether the principal can be reclaimed, and the scope of any damages.

Considering whether to continue transactions and how to pursue claims where the loan question is in doubt

Where there is doubt, three questions arise. They are separate questions, and one answer cannot settle the other two.

First, how are the transactions already carried out to be assessed? Second, are the claims currently being made to be continued, narrowed, or accompanied by the return of part of what has been received? Third, what is to happen to future transactions — a change of method, a narrowing of scope, or a suspension?

Alongside the basis for the claims, we check the registration and interest rules and the civil consequences that would apply if the transaction were assessed as a loan, and consider whether to continue the claims, to reduce them or make repayments, and whether transactions need to be suspended or corrected. The decision to press a claim and the decision to limit or correct are given the same weight.

Where the contracts or the practice are to be changed, the assessment of past transactions, the settlement of existing claims and amounts received, and the lawfulness of the business as changed are also considered separately. Amending the current contract does not by itself resolve the position on past transactions.

3. Considering claims against the user company and whether repurchase can be required

Checking the obligation to hand over collections and the history of the failure to remit

Where the user company does not remit money it has collected from the account debtor, we first check which contractual provision the obligation to hand it over rests on. We check the provisions on the mandate to collect, the deadline for remittance, segregated management, and what happens on delay.

Next we check the history of the failure to remit. When did the account debtor pay, when did the user company receive the money, and where is that money now? The response differs according to whether this is simply a delay in remitting or the money has been spent on other things. Where it is suspected that the money has been spent, there are situations in which steps beyond a civil claim are considered, but that decision is taken only after the facts have been checked.

We also check the user company's financial position: its relationships with other purchasing companies and with financial institutions, whether other creditors are making demands, and whether the business is viable. These bear directly on the prospects of recovery and on the choice of means.

We also check when the failure to remit arose and the state of the transactions before and after that point. Where purchasing continued after the failure to remit, we make sure that the reasoning behind that decision can be explained. If the purchasing company is assessed as having continued to deal while aware that the user company's financial position was deteriorating, that fact may be relied on later in the context of avoidance in insolvency proceedings, or in the context of a demand for the return of money.

Checking the conditions for repurchase on grounds such as non-existence of the receivable or breach of contract

Where repurchase is to be required, we check the provision relied on and the conditions on which the obligation arises. Repurchase provisions are generally tied to events such as the receivable not having existed, the facts differing from those the user company represented, or the user company having breached the contract.

The distinction that has to be drawn here is between repurchase required on the sole ground that the account debtor does not pay, and repurchase required on grounds arising on the user company's side. The former places the risk of non-collection on the user company, and may affect how the nature of the transaction is assessed. The latter answers the non-existence of the receivable or an inaccurate representation.

Where repurchase is required, therefore, we make clear which event it is based on and make the demand together with the materials supporting that event. Where the practice of requiring repurchase without identifying the event has continued, that practice may itself be treated as a fact showing how the business was actually conducted.

Distinguishing non-payment by the account debtor from breach of contract by the user company

There can be several reasons why an account debtor does not pay: lack of funds; a dispute about the content of the underlying transaction; an assertion of set-off; a dispute about the validity of the assignment; or withholding payment because a demand has been made twice over.

Of these, a dispute about the content of the transaction and an assertion of set-off go to the content of the receivable itself, and lead on to the question whether the user company's representations were accurate. A simple lack of funds, by contrast, is not a question about the content of the receivable. Requiring repurchase without checking which reason applies may result in a demand that has no basis.

Considering the basis and amount of claims and any demand for the return of money from the other side

The user company may demand the return of money already paid, on the footing that the transaction was in substance a loan. In that case we first check the content of the other side's case and the basis on which it is calculated: which transactions, which sums, and on what calculation.

We then check the basis and the amount of our own claims and of the other side's claims. Where the transaction would be assessed as a loan, we also revisit the basis of claims that assumed a sale, set out how payments are to be appropriated, and consider whether set-off is available, the limitation period, and the effect of any agreements already made.

Where part of the other side's case has merit and part does not, we separate the two at an early stage. Fixing on a decision to contest everything at the outset risks narrowing the opportunity to modify the position and to consider terms of resolution.

4. Sorting out the position with the account debtor and competing rightholders

Checking the account debtor's defenses, set-off and payment, and the effect of restrictions on assignment

The Civil Code provides that the obligor may assert against the assignee any ground that arose against the assignor up to the time the perfection requirements were satisfied — perfection being the point at which an assignment can be asserted against the obligor or against third parties. It also provides that the obligor may assert against the assignee a set-off using a claim against the assignor acquired before that time. Beyond this, even a claim acquired after perfection may be available for set-off where it arose from a cause predating that time, or where it arose from the contract that gave rise to the purchased receivable. A claim acquired from another person after perfection, however, is excluded from this treatment. The point in time used here is, as a general rule, the time at which notice reaches the account debtor or consent is given, not the date on which registration was made. Where there is a restriction on assignment, we also check the special rules under which that point in time changes when a demand for performance within a set period is made or the obligor is required to make a statutory deposit.

As to restrictions on assignment, the Civil Code provides that even where the parties have manifested an intention to prohibit or restrict the assignment of a claim, the effect of the assignment is not impaired. That does not mean that a restriction on assignment has no significance; separate provisions are made for the protection of the obligor. Where the master agreement with the account debtor contains a restriction on assignment, we check these provisions as well.

Distinguishing registration of the assignment from perfection against the account debtor

This is an area that is easily confused in practice.

The Civil Code provides that the assignment of a claim cannot be asserted against the obligor or any other third party unless the assignor has given notice to the obligor or the obligor has given consent, and that such notice or consent cannot be asserted against third parties other than the obligor unless it is made by an instrument bearing a certified date.

By contrast, the Act on Special Provisions for the Civil Code Concerning the Perfection Requirements for the Assignment of Movables and Claims provides that, where a juridical person has assigned a claim and the assignment has been registered in the assignment registration file, notice by an instrument bearing a certified date under the Civil Code is deemed to have been given as regards third parties other than the obligor of that claim. It further provides that, where registration has been made and the assignor or the assignee gives notice to the obligor by delivering a certificate of registered matters, or the obligor gives consent, the same applies as regards that obligor.

In short, registration alone does not perfect the assignment against the account debtor as obligor. As against the account debtor, either notice accompanied by a certificate of registered matters, or the account debtor's consent, is required. The view that a demand can be made on the account debtor because registration exists overlooks this distinction.

Checking priority where there are multiple assignments or attachments

Where the same receivable has been assigned to more than one party, or where attachments compete, the general rule is to check the order in time between the satisfaction of the requirements for asserting the assignment against third parties and the taking effect of the attachment. Where notices arrive at the same time, or where the order between them cannot be established, a separate analysis is needed. What we check is when each assignee's notice arrived, when consent was given, when registration was made, and the date and time on which any attachment order was served on the account debtor. Where notice was given by an instrument bearing a certified date, the date and time it arrived is what matters, so we check whether there is a record of it.

Where attachments compete, care is needed in deciding who is to be paid. The account debtor may make a statutory deposit — a payment into an official depository which discharges the debt and leaves the entitlement to be resolved separately. In that case we check the ground and type of deposit, and consider matters such as establishing who is entitled to claim the deposited money and responding to the distribution procedure before the execution court.

Where multiple assignments come to light, we also consider claims against the user company. We check whether assigning the same receivable to more than one party breaches the representations and warranties that it had not been assigned, or the provisions restricting disposal, and consider whether that provides a basis for repurchase or for damages.

Checking that notices of assignment, demands for payment and methods of contact are appropriate

The manner of giving notice to, and making demands on, the account debtor also needs to be checked: what the notice says, how it is sent, and where it is sent. We also check whether the frequency and content of contact with the account debtor stay within what is generally regarded as reasonable.

The account debtor is in many cases a business that continues to trade with the user company. Depending on how contact is made, it can affect the user company's standing and, as a result, make the receivable harder to collect. Depending on the manner of it, it may also give rise to separate legal problems. Whether a demand is necessary and how it is made are considered separately.

5. Taking negotiations, legal proceedings and corrective steps forward

Considering the other side's means and the need for provisional relief or litigation

In considering the means of recovery, we check the likely financial means of the other side. What has to be prepared differs according to whether the claim is against the user company or against the account debtor.

Where an application for provisional relief is under consideration, both the right to be preserved and the necessity for preservation have to be shown, and security is usually required. We assess the necessity in light of the cost and the time involved.

Alongside the analysis of the rights in the purchased receivables, see the guide on when a business partner does not pay: unpaid receivables and late payment.

Considering insolvency of the user company or the account debtor and the response to avoidance claims

Where insolvency proceedings are commenced in respect of the user company or the account debtor, the position changes. We first consider separately which of the two it concerns. Where proceedings are commenced in respect of the user company, and the perfection requirements for a valid sale are in place, the question is whether the purchased receivables are separated from the property subject to the user company's insolvency proceedings. That is distinguished from the exercise of rights where the transaction is assessed as one by way of security. Where proceedings are commenced in respect of the account debtor, the focus is on filing a claim in respect of the purchased receivable. In either case, responding to avoidance claims concerning money already received may become an issue.

In particular, avoidance may be asserted in relation to assignments of receivables or receipts of payment made before the commencement of insolvency proceedings. The points in dispute are then the timing of the assignment, the adequacy of the consideration, and what was known at the time about the other side's financial position. The credit assessment materials from the time of the transaction carry weight in this context.

Considering explanations to the authorities and corrections to the transactions and to the way claims are made

Where an inquiry is received from an authority, we check the facts and materials requested and reply distinguishing between facts that have been checked, legal views, and matters not yet checked. We avoid stating matters that have not been checked as though they had been.

Where corrective steps are taken, we set out specifically what they are. Beyond amending the contracts, we set out how the practice will change — identifying the event relied on when repurchase is required, the handling of extensions of time, the method of calculating fees, the method of collection, and how records are kept. And we set out, alongside this, the assessment of transactions before the change and the settlement of existing matters.

If the corrective steps are limited to future practice, the past transactions are left unexplained. Conversely, expressing a view about the past may affect the position taken in civil proceedings that are under way. What is said, and how far, is a decision taken with the state of the civil dispute in view.

On the steps common to organizing materials requested by an authority and preparing for inspections and interviews, see the guide on dealing with regulatory authorities.

Managing settlement terms, the state of recovery and outstanding matters

Where a settlement or an agreement for payment by installments is made, its terms are managed: the state of performance, what happens on default, and whether there is any security or guarantee. The settlement agreement should state expressly the receivables it covers and the scope of the release clause.

Outstanding matters are also managed as a list. Where there are several transactions with the same user company, resolving only some of them leaves the treatment of the rest unclear. In particular, where the question whether the transactions are loans has arisen, the terms of a settlement of one matter may be relied on as a precedent for the others. We check the scope of the release clause and the effect on the other matters before agreeing.

Where there are other transactions of the same kind, we also check whether the points raised in the present dispute apply to them. Dealing with matters one at a time means the same point recurs, and the response to it is improvised each time.

On notice and settlement of accounts when a continuing purchasing arrangement is brought to an end, see the guide on ending a business relationship and refusing to renew a contract. That said, a decision to suspend transactions because of a suspected illegality has to be considered separately from the ordinary termination procedure.

How we assist

Setting out the receivables, the state of recovery and how the transactions were actually conducted

We compare the master agreement and the individual agreements against the practice, and set out how the receivables arose, what remains outstanding and who holds them, the state of perfection, and the assertions of competing rightholders. We also check, from the records of demands and payments, where the burden fell when the account debtor did not pay.

Assisting with responses to claims and demands for the return of money, and with dispute procedures

We assist with the basis and scope of claims against the user company and the account debtor, with responses to demands for the return of money, and with provisional relief, litigation and insolvency proceedings. We also consider the order and manner of contact, in light of the effect on recovery.

Assisting with the loan question, with responses to the authorities and with corrective steps

We assist with an analysis based on how the transactions were actually conducted, with replies to the authorities, and with reviewing the contracts and the practice. The assessment of past transactions, the settlement of existing matters, and how the business is to be conducted going forward are each considered separately.

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Where it appears	Legislation	Source type
Checking who bears the risk of non-collection and the terms on repurchase and recourse	Money Lending Business Act（貸金業法）	Japanese legislation / English translation
Considering registration under the money lending legislation and the rules on interest and fees	Money Lending Business Act（貸金業法）	Japanese legislation / English translation
Considering registration under the money lending legislation and the rules on interest and fees	Interest Rate Restriction Act（利息制限法）	Japanese legislation / English translation
Criminal penalties for agreements for interest exceeding a specified rate	Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates（出資の受入れ、預り金及び金利等の取締りに関する法律）	Japanese legislation / English translation
Checking the account debtor's defenses, set-off and payment, and the effect of restrictions on assignment	Civil Code（民法）	Japanese legislation / English translation
Distinguishing registration of the assignment from perfection against the account debtor	Civil Code（民法）	Japanese legislation / English translation
Distinguishing registration of the assignment from perfection against the account debtor	Act on Special Provisions for the Civil Code Concerning the Perfection Requirements for the Assignment of Movables and Claims（動産及び債権の譲渡の対抗要件に関する民法の特例等に関する法律）	Japanese legislation / English translation
Checking priority where there are multiple assignments or attachments	Civil Enforcement Act（民事執行法）	Japanese legislation / English translation
Considering the other side's means and the need for provisional relief or litigation	Civil Provisional Remedies Act（民事保全法）	Japanese legislation / English translation

Legal information reviewed: 2026-09-18

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This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.