Remember the first Star Wars movies? Throughout the three-film series, Han Solo is on the run from the intergalactic bounty hunters - a large price on his head for huge debts owed to Jabba the Hut. Eventually, he's caught by Darth Vader, freeze-dried, and handed over to Boba Fett to be hung up for display on the wall of Jabba the Hut's odious lair. Lucas makes the point clear: debtors make great conversation pieces.

Although this sort of thing generally only happened a long time ago in a galaxy far, far away, being in debt is a universal experience that can - and has - happened to anyone. Here in Japan, whether you owe money to Jabba the Hut or your local telephone company, help is available. And if you're a telecommunications or Internet access service provider or creditor that would rather have debts settled than rows of frozen debtors lining office walls, a debt collection agency may be your next best step.

Telecom industry success and other problems

The 90s have witnessed explosive growth in telecom services and usage in Japan - especially for mobile communications and Internet access service providers. However, with this explosive growth, there has been an equally explosive rise in the amount of outstanding debt due to nonpayment for these services. Why? As information becomes more valuable to individuals and businesses, people become increasingly dependant on access to that information. If, for any reason, they are deprived of the ability to pay for access service, people turn to desperate measures, including deliberate nonpayment. As a result, there are more than a few companies and individuals who have left a trail of debt that is now bearing down heavily on the cost effectiveness of the telecom service industries.

A yakuza has to make a living

In the not too-distant past in Japan, debt problems of all manner were handled in rather unsavory ways. By law, only licensed lawyers were allowed to perform debt collecting services, and with their high fees and relative scarcity, only the largest companies could afford to use them. Besides, it was considered bad form to publicly go after your business competitor for something as mundane as money owed. Therefore, collecting outstanding debts large and small - commercial as well as private - was largely handed over to the yakuza organized crime syndicates. Standard collection methods ranged from harassment to much, much worse, and countless gangster movies have dramatized the concrete-shoe fate meted out to deadbeats of all stripes and colors.

Japan debt collection goes mainstream

With an eye to helping lift Japan's debt collection industry to more accepted international standards, the International Credit Management Association (ICMA), which has operated under the administrative executorship of Advance & Associates Co. since 1992, was formed to act as a safety net and help both individuals and companies. ICMA's goal is to minimize all manner of debt collection problems and negotiate mutually satisfactory settlements of outstanding claims - without resorting to the scare tactics of yesteryear.

The ICMA is a voluntary partnership with about 500 members, and it operates strictly within legal bounds, using a section of the Civil Law that allows for members of a partnership to collect the debts owed to other members. About 35 members operate in the telecom industry. Any creditor in good standing who has unpaid accounts receivable or credit due may become an ICMA member upon payment of the signup and investment fees (access http://www.tcmjapan.com for more information). After joining, any debt owed to the member can be submitted to ICMA to be processed for collection.

Steven Gan, the American president of Advance & Associates, said, "We are presently handling thousands of claims against debtors who have not paid their long distance, Internet service provider, or mobile phone charges. Moreover, about 10% of these debtors have two or more claims from different companies against them." But how do people get into these situations? Gan further explained, "For some debtors who are struggling to keep their businesses afloat, switching from one company to another is part of their survival game. In addition, there are also quite a few people out there who are actually on a frolic, and enjoy leaving a path of nonpayment destruction from one company to another. Either way, a debt that remains a debt ends up becoming a loss to the individual or company that supplied the product or service." Gan also explained that with about 7 percent of ICMA membership coming from the telecom industry, ICMA can see the total financial impact of the collection problems affecting telecom companies.

Outsourcing to a collection service

When to outsource to a collection agency like ICMA depends on several factors, but in the end it is necessary for every creditor to understand when to let go. Gan also explained that when claims are outsourced by a creditor only after the debtor's telephone has been disconnected and letters are being returned, it is going to be a very difficult to collect, no matter who does the collecting. Therefore, it is imperative to outsource the credit on a timely basis while the debtor can still be contacted. "We often tell creditors that when it comes to collecting bad debts, we can be like a doctor and try to help the patient, but once that patient has died, we can only be a mortician," Gan said wryly.

There are presently 26 professional collectors working at ICMA. Many of the collectors are bilingual in English and a few are bilingual in others language such as Chinese, Korean, or Portuguese. All are extremely adept at communicating with different personalities under potentially tense situations. Key job requirements? The ability to listen and respond appropriately to the reasons why someone cannot or will not pay.

Collection process

When a claim comes in for collection, ICMA sends out a mail or e-mail (or both) notice to the debtor. Some debtors will immediately call after receiving a notice and confirm that payment will be forthcoming, and that is often all the action required. In other cases, a collector must call them and confirm acknowledgement of the debt and ask when payment will be forthcoming. At this stage, ICMA requests that payment promises be supported by signed payment schedules, guarantors, automatic bank transfers, etc. For many large-value claims, it will be necessary to have a meeting with the debtor to determine their circumstances and understand how payment is going to be made. If there are disputes against the creditor's services, ICMA will certainly try to understand exactly what the problems are, relay that information to the creditor, and look for a compromise and resolution. Should no resolution be forthcoming, ICMA will pass the claim to its legal counsel to discuss litigation with the creditor.

And in the end

When debtors cannot be contacted but are residing or working at a known address, an ICMA investigator will go to the debtor's home or work (if it's a commercial claim) and make contact with the person and try to obtain acknowledgment of the debt in person. "When people do not take their obligations seriously, debts become weights that can eventually bring a dynamic economy to a screeching halt. I suppose in the end we don't just view ourselves as a collection agency, but as a key support of society's financial stability," says Gan. While it may no longer be acceptable to put the freeze on debtors - or hustle them off to the ice planet Toth - there is going to be a growing need for organizations that can collect debts - something that Japanese companies seem to have no shortage of.

Contact Steven P. Gan at +813-5447-6355 or tcmjapan@gol.com.