MICHAEL H.WILBUR‹BLACK STAR FOR TIME

Koshu had always scoffed at the ads for quick, no-fuss loans that regularly arrived in the mail. But a year-and-a-half ago, after his bank unexpectedly called in a big loan, the restaurateur and bookstore owner (who asks to be identified by an alias) decided to take a second look. There weren't many other sources of funding out there. Other banks refused to lend to him and visiting a small-business loan company was unthinkable: in his small town in northern Japan, word would quickly spread that he was on the outs with his bank, a clear sign of trouble. So as a stopgap measure--just until he could sell some property--he filled out a form for a quickie loan and faxed it off. Hours later, $8,500 landed in his bank account. The only catch was the sky-high charge: 49.5% interest for a month, about 15 times the legal limit.

Koshu's short-term plan mushroomed into a nightmarish cycle of borrowing, repayment and more borrowing. When he couldn't pay back the lender, he got a call from a man offering more money--at the same exorbitant rate. Eventually, Koshu found himself writing 60 checks a month to repay creditors, and sinking deeper and deeper into debt. Last summer, he gave up, having shelled out a total of $100,000 in interest payments. His restaurants and bookstores were gone, along with his fancy home, his Mercedes and his wife, who left him. Today Koshu lives alone in an apartment outside of Tokyo, trying to piece his life back together: "They sucked me dry."

"They" are the loan sharks operating a troubling new money-lending racket known as "system finance." Like traditional usurious lenders, system-finance gangs are ruthless and sometimes brutal. And they have brought some high-tech twists to the game. Using computers, these modern loan sharks work out of back-room offices, combing through huge financial databases for companies in the red. When the computer spits out a candidate, they barrage him with direct mail, advertising speedy, no-questions-asked loans. They operate by cell phone and fax, never meeting their customers face-to-face. That, police say, makes it almost impossible to catch them.

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