Consumer lender Aiful Corp. suspended some operations at all of its nearly 1,900 outlets nationwide Monday in line with punishment meted out by the Financial Services Agency for illegal loan-collection tactics.

Five outlets found by the FSA to be using illegal practices will be barred from soliciting new customers and from lending for 20 to 25 days, while the remainder, including some 1,400 unmanned outlets, will be prohibited from such operations for three days.

All outlets may continue to accept repayments from customers.

It is the first time the FSA has ordered a top consumer loan firm to cease operations at all outlets.

The Aiful scandal has meanwhile sparked debate on reforming the lending business laws.

FSA Commissioner Hirofumi Gomi told a news conference his agency will deal strictly with illegal business practices by consumer lenders as he thinks similar problems could occur again in the industry.

A number of banks have suspended lending collaboration with Aiful since the FSA issued the order April 14.

Meanwhile, the Finance Ministry’s Kinki Finance Bureau dispatched officials to Aiful’s Kyoto headquarters and an outlet in Osaka to check whether the firm has halted operations as ordered.

The order was issued after five Aiful outlets engaged in illegal acts to collect loans, including one that prepared a letter of proxy without a customer’s consent to obtain proof of income.

Other illegal acts included calling debtors’ families or companies to press for repayments.

The FSA searched Aiful’s head office but found no evidence to show it forced the five outlets to aggressively collect debts.

But the agency concluded Aiful failed to develop a companywide internal control system to ensure full compliance with the Moneylending Control Law.

Many heavily indebted people borrow money from more than one lender at high interest rates and then become unable to repay the loans.

The agency is planning to revise the lending law to make it possible to impose administrative penalties on moneylenders that lend to consumers in excess of their repayment capabilities.

At a news conference after the issuance of the FSA order, Aiful President Yoshitaka Fukuda apologized for causing the problem and said the incidents occurred as a result of pushing a “merit-based” wage system too hard.

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