An Interview with Mr. Jin Ra
Chief Operating Officer & Managing Director
Ace Law Group
By Octávio Aronis, Attorney
During my thirty years of international debt collection experience, one of the most unique individuals that I have met is Mr. Jin Ra from Seoul, Korea. I have known Jin for a long time and have had several opportunities to work with him on collection claims between our two countries. Following below is my interview with this esteemed professional, which I believe you will find most informative.
Octávio: Jin, it’s always a great pleasure to have the opportunity to talk with you. Let me start by asking you to tell our readers a little bit about your background and how you became involved in international collections.
Jin: Thank you, Octávio.
Subsequent to a challenging career of ten years with Samsung Electronics as a regional sales and marketing manager in Europe, I launched my own business, a global business consulting firm. Gradually, this led me to the fascinating wide blue ocean of the credit risk management and debt collection industry.
For more than seventeen years now, I have been involved in international credit risk management and debt collection through which I have been able to meet a wide range of international specialists and professionals. During this time I have also come to appreciate the opportunity to be the legal life line and safety net for global credit information providers, international trade credit insurers, collection agencies, and international law firms who need assistance in Korea, especially in the area of debt collection.
Octávio: What is the collection industry landscape like in South Korea?
Jin: I would say that the debt collection industry in Korea really only got going from the beginning of this century. Until then, the negotiation or mediation by a third party to recover debts was not a familiar concept to the Korean people. In most cases where the outstanding amount was significant, it would be negotiated and brought to court by attorneys.
Presently, there are only about twenty debt collection agencies and half of them are the related subsidiary of the major Korean local banks. Around the year 2000, the government passed legislation that allowed several Korean Banks to establish their own collection agency companies in order to focus on collecting their own non-performing loans and/or credit card related debt.
In short, we have attorneys who are able to collect any kind of commercial or consumer debt, collection agencies that are operated by Korean Banks to collect their own financial institution related debt, and certain designated licensed credit information companies that are able to collect consumer debt.
Octávio: In general, do South Korean debtors have the will and volition to pay or is it a struggle to persuade debtors to acknowledge their payment obligations?
Jin: Most debtors do have the volition to pay but sometimes it’s necessary to compel them to pay. In this situation, showing authoritativeness packaged within the power of legal enforcement is usually enough to keep the payments coming in.
Octávio: About what percentage of all commercial claims can be settled through normal collection efforts and about what percentage need to go to court? If a debtor has to be sued, what are the general costs involved and how long does it take to get a judgment in your country?
Jin: Generally speaking and from my experience, more than ninety-five percent of the claims are solved in an amicable way. If the debt is undisputed, the creditor, through his representative attorney can obtain a Legal Payment Order. This Legal Payment Order procedure takes a maximum of three months to obtain if the claim is undisputed and is legally enforceable.
However, if the claim is disputed, the creditor will need to commence with a full scale suit which generally takes 1-2 years to reach a judgement or settlement. In this case, the legal costs will depend on the nature of the claim and amount of the debt. Therefore, a Legal Payment Order seems to be a very cost and time effective means for pursuing undisputed claims, especially for smaller amounts.
Octávio: In addition to the normal court process, is there a government arbitration system in place that creditors and debtors can use to avoid complicated or costly court procedures?
Jin: Yes. We have The Korea Arbitration Board (KCAB) which has been providing an out of court dispute mediation platform since 1966. In many cases, the KCAB can provide a fast, impartial and confidential resolution of business disputes. The key point in using the KCAB is that both parties need to agree to use this organization.
Octávio: In Brazil right now, we are having a terrible time with the exchange rate as the Brazilian Real is losing quite a lot of value against the US Dollar. This is causing a great payment hardship for many Brazilian debtors who want to pay but can’t. How about in South Korea, is the economy favorable or unfavorable to Korean debtors who have to pay to overseas creditors?
Jin: Fortunately, the exchange rate between the Korean Won and other currencies has been rather stable for the past decade.
Octávio: I think you mentioned to me that your firm represents several credit insurers. Do you also work with property & casualty and marine insurance carriers? Do you get involved in collecting subrogation claims?
Jin: Yes to both questions. We represent the Korea Trade Insurance Corporation (KSURE) on their subrogation claims and the Korean Exim Bank for their non-performing loans to overseas customers.
Octávio: Do South Korean business owners rely on credit reports and other information sources to verify credit worthiness of potential customers inside South Korea, or is trust more established through reliable introductions and a handshake?
Jin: Although the credit report market has been rapidly growing in Korea over the past several years in which most companies try to obtain some level of financial and trade payment information on a new prospect, many deals are still made while drinking beer or playing golf.
Octávio: If a Brazilian exporter were to receive an inquiry from a Korean importer to purchase their product, what would be one of the most important credit tools or one of the first steps the Brazilian exporter should take to verify credit worthiness
Jin: Firstly, it’s important to obtain a very detailed credit report in which as much as possible, the financial and trade payment information can be verified. Secondly, having on-site investigation by a well trained field-collector to confirm the customer’s reality is indispensable. We provide both services at a minimal fee. In addition, we will sometimes perform onsite visits to debtor companies when the amount is substantial and the debtor is uncooperative.
Octávio: Is D&B well established in your country? What other credit information providers are available?
Jin: Although D&B is considered to be quite a good provider of credit information in most countries, it is not considered to be one of the leading credit information providers in Korea.
Octávio: Is credit insurance a product that is often purchased by Korean companies to cover both their domestic and/or international receivables?
Jin: KSURE is widely used for international receivables and covered approximately US $573 billion in sales in 2014.
Octávio: Are there any particular or important items that you often recommend to overseas companies to include in their contracts and documents when doing business with South Korean businesses?
Jin: As accrued interest is not automatically assessed on past due claims prior to suit, the seller should always insert the follow paragraph into their sales contract:
“In the event that invoices become past due, the debtor must pay accrued interest at an annual interest rate of xx%.” When interest is included, the additional interest can be used as part of the negotiation process, i.e. if the principal is paid today we can forego the interest.
Octávio: When at times the situation with North Korea becomes tense, does this affect the general collectibility of claims? Do debtors use any provocation by North Korea as an excuse not to pay?
Jin: Never! That’s only a politician’s excuse. ^^
Octávio: What are some thoughts or advice can you give to companies that wish to do business in South Korea?
Jin: Always obtain the Business License and the Company Registration numbers of the contractual counterparty, along with the correct names of all legal representatives of the corporation (or private company) by obtaining a copy of their passports, if available. This information will not only help to identify the legality of the company at the outset, it will also be very useful in trying to locate a debtor who has skipped out.
Octávio: Jin, I have to tell you how enjoyable and informative it has been to speak with you today. I’m quite confident that many readers have also found your experience and expertise to be very valuable. Obrigado.
Jin: Thanks so much for a wonderful opportunity to talk with you today. Obrigado!
For any questions or needs, please feel free to contact Mr. Jin Ra at:
Ace Law Group
Songwon Building 1&2F,
Seocho-Gu Gomurae-Ro 6-6,
Seoul, 137-803 Republic of Korea
Phone: +82. 2. 3487. 5000
Direct: +82. 572. 9327
Fax: +82. 2. 3487. 6848
Mobile: +82. 10. 8455. 0980
This article has been edited by Steven Gan of Stellar Risk Management Services, Inc.
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