The investigation into a business practice that collected a massive amount of money by using sweet-talking sales pitches to entice elderly people, among others, to make investments has taken a decisive step. Regulations covering such business practices should be quickly tightened to prevent more people from being scammed.
The Metropolitan Police Department and other police forces have arrested on suspicion of fraud the former chairman and other officials of Japan Life Co., a Tokyo-based magnetic therapy device dealer that collapsed with huge debts. The suspects allegedly used bogus explanations to deceive their victims into handing over money.
Japan Life used a so-called rental owner system in which customers bought products and then lent these items to other customers. It is believed the company raked in 210 billion yen from 10,000 customers. Even after Japan Life had liabilities exceeding its assets, the company apparently continued to solicit customers by claiming it would guarantee the principal and pay annual returns of 6%, among other things.
The former chairman flaunted his connections with politicians and celebrities. He advertised that he had been invited to a cherry blossom viewing party hosted by then Prime Minister Shinzo Abe. He apparently emphasized that he was widely trusted in social circles to reassure customers that it was safe to invest in his company.
Most of the victims were elderly and many lost money they had saved up for old age. Some were reportedly induced into making large investments after going to sales reps for health advice or receiving invitations to concerts or to travel.
Police authorities must conduct an exhaustive investigation to uncover the full picture of what happened, including the true extent of the financial losses and the methods used to dupe investors.
Local consumer centers across the nation had previously received many complaints from people who had problems with the company. Some victims had not received repayments after canceling contracts. Since 2016, the Consumer Affairs Agency had issued the company four business suspension orders.
Even if current laws are limited in how they can address such cases, why was the damage not stopped earlier?
The owner system at the heart of this scandal is commonly called a "sales deposit scheme." In some heinous cases, the products or services offered do not even exist. However, as long as dividends continue to be paid, it is difficult for customers to realize they are being deceived. In the past, this has resulted in many consumers losing money.
A law on deposit and transaction agreements for specified commodities was enacted in the wake of the scandal in the 1980s involving the Toyota Shoji company, which ran a scam selling gold to investors. However, this law covers only certain products, and losses have continued to pile up as swindlers develop new schemes. Total losses have topped 1 trillion yen.
An expert panel of the agency compiled a report that stated the business practice should be banned, in principle. It is understandable why the panel concluded such actions were "antisocial," given the high risk they could cause massive losses to consumers.
The agency aims to submit a bill to revise the law during next year's ordinary Diet session. The agency should consider how to make the legislation effective, such as by closing loopholes and imposing heavy penalties when violations occur.
Efforts to quickly detect unscrupulous business operators and notify consumers about them should be strengthened to prevent these companies from ripping off more people.
-- The original Japanese article appeared in The Yomiuri Shimbun on Sept. 24, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
