On Tuesday, August 31st, the Nikkei reported that lawyers representing a group of 336 borrowers announced their intent to file a lawsuit against Suruga Bank (8358.T) for borrowed funds totaling 80,584,170,000 yen.  

The plaintiffs claim they were sold properties that were well above market value and that to qualify for purchase financing, Suruga Bank knowingly used forged documents to lend at levels the plaintiffs couldn't prove they could afford otherwise.

This isn't the first time Suruga Bank has been sued by borrowers.  In March, 2021, Suruga Bank was forced to cancel the loans issued to 257 share house owners in a case stemming from 2018.

These share houses were sold to buyers by the now defunct Kabocha - no - Basha (in English “Pumpkin Wagon”) who pushed clients into no money down loans with Suruga Bank to finance brand new, wood frame share houses.

Pumpkin Wagon (Kabocha-no-Basha) TV commercial from 2017 featuring Rebecca Eri Rabone, aka Becky, a then famous singer and actress in Japan.  Pumpkin Wagon reportedly paid Becky's management company 300 million yen to be in the spot, which Pumpkin Wagon alluded so as to increase confidence with buyers; if they could afford Becky, then the developer and related companies must be in sound fincanical health and repute. 

These share houses were subleased by Pumpkin Wagon’s operating company called Smart Days, who worked with Suruga Bank to inflate rents that should have kept the owners in the black despite the high monthly loan repayments.

That is, until Smart Days and related sublease companies went bankrupt as they couldn't rent the rooms out at a high enough occupancy rate to cover lease obligations to the owners, leaving many borrowers on the hook for loan repayments that, in many cases, were much higher than their gross monthly salaries.

So in 2018 the share house owners filed a class action lawsuit against Suruga Bank which in March, 2021, saw the bank cancel the loans with Suruga taking ownership of all the properties to be sold at a much lower amount then was originally lent. 

Suruga Bank Stock Price 5 Year Chart as of September 2nd, 2021.  The steep drop from January, 2018 is when the Pumpkin Wagon case came to light.  Chart coutesy of Reuters. 

Throughout the course of the Pumpkin Wagon investigation, plaintiff's lawyers became aware that Suruga Bank had made whole building investment property loans to clients from other real estate firms under seemingly similar, fraudulent circumstances as the owners of the Pumpkin Wagon case. 

One of Suruga Bank’s main defenses in the Pumpkin Wagon trial was that they were duped as well, blaming property brokers and sharehouse operators for the loan document tampering.  The bank claimed they approved loans based on photocopies and failed to check original documents. 

The 336 borrowers of this new claim for damages, completely unrelated to the Pumpkin Wagon share house plaintiffs, alleges that their loans predate the Pumpkin Wagon case thus seeking to undermine Suruga Bank’s argument that Pumpkin Wagon loans were an isolated case approved by managers in certain branches too cozy with the developer and share house operators.

According to sources, Suruga Bank’s defense this time is estimated to be that since these whole building investment property loans were brought to the bank by many different real estate companies and not just one, plaintiffs need to file individual lawsuits and not one single class action suit. 

Hiroyuki Kawai, lead lawyer for the new plaintiffs, said that most victims are very motivated to find a legal solution as they feel this type of predatory lending could become a serious social problem if the courts do not continue to set a proper precedent.