CORRECTED - CORRECTED-UPDATE 1-Japan's Aiful to increase capital by $1.1 bln

(Corrects second paragraph to say ...in 2006 ..., not ... last year.)

TOKYO, Feb 13 (Reuters) - Japanese consumer finance firm Aiful (8515.T: Quote, Profile, Research, Stock Buzz) said on Wednesday that it planned to raise $1.1 billion through a new share and convertible bond issue to shore up its operating funds.

Japan's moneylenders have been hit hard by demands to repay interest charges deemed by courts to be illegally high, while stricter usury laws approved in 2006 have raised concerns about future profits.

Aiful said it would issue new stock worth 50 billion yen to company president Yoshitaka Fukuda and his family and would issue euroyen convertible bonds maturing in 2010 worth 70 billion yen.

"We are strengthening the commitment of the company's owners," Aiful said in a statement.

Trade in the shares was briefly suspended after an earlier report on the capital raising. At 0358 GMT, the issue was down 5.7 percent at 1,854 yen.

The shares will be issued at a purchase price of 1,966 yen.

Japan's moneylenders were formerly able to charge interest of between 20 and 29 percent on their loans, due to a grey zone between two conflicting lending laws.

But that loophole will be eliminated by 2009, forcing firms to charge 15 to 20 percent depending on the loan size. (Reporting by Edwina Gibbs; Editing by Hugh Lawson)