Stellar Risk Blog & Events

Debt Collections in Japan – A Cake Walk Compared to the US

Category: Stellar Risk Blog & Events

By Steven Gan
January 22, 2013

I’m often asked about the differences between collections in Japan and the US. Well after performing both consumer and commercial collections in both countries for several years, I would have to say that performing collections in Japan is infinitely easier.

I guess the best way to explain the difference is to show you a typical debt collection conversation that I would have with a Japanese debtor (Mr. Kenji Kobayashi). Read below and enjoy.

Kobayashi: Hello, this is Kobayashi.

Steve: Mr. Kobayashi, this is Steven Gan of the International Credit Management Association (slight bow over the phone). As always you are greatly appreciated. Is now a good time to talk with you?

Kobayashi: Oh yes. I received your letter the other day and I am so terribly sorry that I didn’t call you. Please forgive me.

Steve: No problem at all. As I had mentioned in our letter, there is an outstanding balance of 480,000 yen owed to ABC Credit Card company and with all due respect I would like to kindly ask you when you might possibly be able to consider making your payment.

Kobayashi: Yes, yes, I completely understand and I would like you to know first that I have every intention of fulfilling my obligation and paying this unconscionably delinquent payment. There’s no excuse for it and I feel just horrible.

Steve: I really appreciate your acknowledgement of the situation. Would you kindly help us by making your payment in full very shortly.

Kobayashi: From the bottom of my heart I wish I could say yes to you but I have to tell you that my financial situation is so dire that I can barely make ends meet now.

Steve: I completely understand and appreciate your honestly. What would you be able to afford and at the same time could be reasonable for ABC Credit to accept.

Kobayashi: If possible and with the utmost sincerity I would like to pay this obligation off in 8 payments of 60,000 yen per month starting at the end of this month.

Steve: Oh Mr. Kobayashi, I really appreciate your kind offer but do you think it is possible to pay this obligation off within 4 payments of 120,000 yen per month?

Kobayashi: Mr. Gan, my situation is so tight and I really don’t want to make any promises that I would not be able to keep. As it is now, I feel so ashamed about not being able to pay this debt and several other debts.

Steve: Would you possibly consider 6 payments of 80,000 yen per month? Since the debt is already about 1 year old, I don’t think that ABC Credit can wait much longer.

Kobayashi: Then I will try to do 6 payments of 80,000 yen per month. Please understand Mr. Gan that I am taking the last bit of food out of my mouth for ABC Credit.

Steve: Your heartfelt cooperation is tremendously appreciated and I shall convey this to ABC Credit.

Kobayashi: Thank you so much for your call Mr. Gan. I look forward to working with you in the matter and please convey my sincerest apologies to ABC Credit.

Steve: Thank you again Mr. Kobayashi for your cooperation.

Kobayashi: Thank you very much.

Steve: Thank you.

Kobayashi: Thank you and good bye.

Steve: Good bye.

Kobayashi: Good bye.

Steve: (Wait until Mr. Kobayashi hangs up his phone and then I hang up my phone)

The upshot of that conversation is that about 70% of all Japanese debtors will enter into a payment agreement in the first conversation and about 90% of them will break the first payment promise. By about the 3rd call you can finally receive payment and almost all payment schedules from that point forth will be upheld.

So in essence, I suppose the biggest difference in collecting between Japan and the US is that coupled with shame, the Japanese have an overwhelming desire, at least on the phone, to fulfill an obligation. Not like here in the US where I’m sometimes told not so politely to “take a hike”.