For sci-fi lovers, the twilight zone is a scary place, the stuff of bad dreams. But for borrowers of consumer loans in Japan, it is the "gray zone" that constitutes the nightmare.
Japan's financial gray zone exists between two loan rates chargeable under two different laws. The first is the Interest Rate Restriction Law, under which consumer loan companies can charge from 15 to 20 percent interest depending on loan size. The second is the Investment Deposit and Interest Rate Law, which allows them to charge up to 29.2 percent, provided borrowers agree in writing.
Once borrowers wander into the interest-rate no man's land between these two laws, it is difficult to get out. It becomes a case of borrowing from Peter to pay Paul. This juggling act draws people into multiple debts, exposing them to aggressive loan collection tactics. Some are even driven to suicide.