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Wed, Sep 29, 2010 - Page 10 News List

Takefuji becomes lending casualty

COST OF COERCIONThe lender, founded in 1966, said that it doesn’t have the funds to cover claims from borrowers who paid excessive interest charges

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A pedestrian passes in front of an outlet of consumer credit company Takefuji Corp in Tokyo yesterday. Takefuji, which calls itself a “yen shop,” is burdened with claims by customers for refunds of excessive interest charges since the Supreme Court in 2006 entitled borrowers to do so, Tokyo Shoko Research said.

PHOTO: AFP

Takefuji Corp filed for bankruptcy protection, becoming Japan’s biggest casualty of a four-year crackdown on coercive lending to consumers.

Takefuji listed ¥433.6 billion (US$5.1 billion) in liabilities in a filing to the Tokyo Stock Exchange yesterday. Director Junichi Yoshida took over as president from Akira Kiyokawa, while executive vice president Taketeru Takei, son of founder Yasuo Takei, also resigned following a board meeting yesterday, the statement said.

The lender, founded in 1966, aims to restructure its business as it doesn’t have enough cash to repay claims from borrowers who paid excessive interest that have saddled Japan’s consumer lenders with ¥4.4 trillion in costs.

Rivals Aiful Corp, Promise Co and Acom Co may face an increase in claims as borrowers try to beat Takefuji bankruptcy court deadlines.

“Debtors request refunds not only from Takefuji, but from all their lenders,” Takehito ­Yamanaka, an analyst at MF Global Equity in Tokyo, said in a report before the filing. “Claims may increase temporarily in the next couple of months as lawyers gather debtors.”

Takefuji’s failure comes three months after a law went into ­effect prohibiting consumer lenders from charging interest higher than 20 percent or extending loans that exceed a third of a borrower’s annual income.

Its shares tumbled 32 percent to ¥116 at the close of trading before the bankruptcy filing, the maximum daily decline allowed by the Tokyo Stock Exchange. The bourse put them on watch for possible listing on Monday.

Takefuji had ¥20.1 billion in cash and deposits as of June 30, compared with ¥40.4 billion as of March 31. Net income sank 32 percent to ¥6.3 billion in the three months ended June 30, from ¥9.3 billion a year earlier.

“The fall of Takefuji, while having minimal impact on Japan’s financial system, would be gloomy news for consumers on the street and fuel bleak prospects for Japan’s economy,” said Yasuhide Yajima, a economist at NLI Research Institute in Tokyo.

The government’s banking regulator will examine the burden on consumer lenders stemming from their interest refunds, Financial Services Minister Shozaburo Jimi said in Tokyo.

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