The Ministry of Economy, Trade and Industry on Wednesday ordered major English-language school operator Nova Corp. to suspend part of its business operations for holding back money from students who cancelled their contracts, ministry officials said.
The ministry issued an order prohibiting Nova from soliciting customers or accepting applications for contracts exceeding one year or new contracts exceeding 70 hours. The suspension will be in place for six months.
It is the first time for the ministry to issue a business suspension order to an English language school under Japan’s special transaction law. People who are currently taking lessons at the language school will not be affected by the order.
Ministry officials explained Nova operates a system in which students buy points enabling them to take lessons. When they buy a large number of points in advance, they can take lessons at a cheaper price.
However, when people cancelled their contracts before finishing their courses, the company lowered the amount of lesson fees it returned to them. In addition the company didn’t inform people about the procedures for canceling contracts.
In April this year, the Supreme Court ruled that Nova’s policy of demanding penalties when students cancelled their contracts violated a law regulating commercial practices. It said the policy restricted students’ right to initiate the cancellation of their contracts, and ruled the practice invalid.
It has also emerged that the company prevented students from canceling their contracts under Japan’s “cooling off” law which states that people can cancel contracts without any obligation if they do so within eight days of forming the contract, by listing students’ contract day as the day they took tours of classes or received explanations about lessons.
Furthermore, when inviting students to take lessons, the company advertised that they could book lessons any time they wanted, but because of the difficulty in securing teachers, it remained difficult to make bookings. Because of this, the ministry reportedly decided to issue a business improvement order to the firm.
The Ministry of Economy, Trade and Industry and the Tokyo Metropolitan Government conducted an inspection of Nova in February in connection with the law regulating commercial practices. It found that several practices that violated the law had been ordered by the company’s general headquarters. The ministry said it judged the company’s practices to be “organized and malicious.”
Nova operates over 900 schools across Japan, and has about 480,000 students. Since 1996, the National Consumer Affairs Center of Japan has received over 7,000 complaints and inquiries about the company.