Wall Street Journal

Spain’s Showy Debt Collectors Wear a Tux, Collect the Bucks
Their Goal: Publicly Humiliate Non-Payers; Seeing the Pink Panther at the Door

By THOMAS CATAN
MADRID — Stepping out of a black-and-white car, Manuel Llan slips on a top hat, bow tie and a mournful expression. Before knocking on the door, he picks up his briefcase and pauses for effect, making sure the neighbors can read the writing.

El Cobrador del Frac, it says on the side of his case, in large capital letters: “The Debt Collector in Top Hat and Tails.”

The neighbors need no explanation. Mr. Llan is making his latest call on Spain’s legion of delinquent debtors.

“There’s been a huge growth in this business,” Mr. Llan, a former taxi driver, says as he demonstrates the approach he takes on house visits. “People just can’t pay their debts.”

As Spain’s once-thriving economy slides toward recession, debt collectors say they are doing a roaring trade. The country’s creaking legal system is overwhelmed with cases, so many companies say the only way to get people to pay is to shame them in front of the neighbors.

Humiliation is a powerful motivator in a country where people’s honor and public image are paramount concerns. El Cobrador del Frac claims a success rate of more than 60%.

“The idea is to make the delinquency public,” says Juan Carlos Granda, a director at El Cobrador del Frac, which has been in business for two decades. “We have our professional uniform like anyone else,” he adds.

Other companies in the fast-growing field include The Scottish Collector, which threatens to send a bagpipe player in highland dress to debtors’ homes, and the Monastery of Collection, whose employees arrive decked out as Franciscan friars. Others dress as bullfighters, Zorro or the Pink Panther.

“In times of crisis, companies like ours sprout like mushrooms after the rain,” Mr. Granda says.

Not all cases call for costume. Sometimes, instead, the collector simply phones the neighbors. “I want the people around you to say: ‘The debt collector came looking for you.’ It hurts your public image,” Mr. Granda says.

Until it soured this year, Spain’s economy was on a 14-year tear — the single largest generator of jobs among the 15 countries that use the euro as currency. House prices tripled in a decade as Spaniards binged on the wave of easy borrowing that followed the country’s adoption of the euro in 2002.

After amassing a mountain of debt, Spaniards now find themselves squeezed by rising inflation and mortgage rates. Bank-loan defaults jumped by a third in the month of July, hitting a 10-year high. Unemployment is at 11.3%, the highest in the European Union.

El Cobrador del Frac says its business has risen by a third this year and that it is hiring 150 new collectors in its 10 offices in Spain and Portugal.

Hidden away in a rundown corner of Madrid’s financial district, its head office is a hive of activity. Banks of telephone operators take calls from clients. The decor includes hunting trophies hanging on the walls — stuffed heads of antelopes, lions and grimacing hyenas. “Bad debtors,” Mr. Granda jokes.

He recounts one of his proudest successes. El Frac, as the company is known, was pursuing a wealthy Madrid couple who hadn’t paid the bill for a lavish wedding reception attended by hundreds. So one of Mr. Granda’s men obtained the guest list. “We called two or three people on the list and said: ‘We’re charging you €500 for the chicken you ate, for your part of the wedding cake,’ ” Mr. Granda recalls.

The debtors paid up, he says.

Spanish debt collectors insist they provide a vital service for small businesses, given that it can take years for a claim to wind its way through the courts.

Not everyone is convinced. One group of former El Frac employees has set up a firm, The Debtor’s Defender, in opposition to the collectors. The collectors are bullies, says Pablo Camacho, its manager. “They overstep the line, and that’s where we come in.”

He says his group has been able to win several court judgments against collection agencies, including €6,000 several years ago against El Cobrador del Frac after it was deemed to have harassed a restaurateur who owed money, shadowing him in costume as far as his son’s school. (Privacy laws protect the identity of the restaurateur.) “They invaded the son’s right to privacy and humiliated him in front of his professors and colleagues,” Mr. Camacho says.

Mr. Granda of El Frac says he doesn’t recall the case. He is, however, familiar with Mr. Camacho. “We fired him,” Mr. Granda says.

Mr. Camacho says he wasn’t fired, but quit.

Spain’s Association of Collection Agencies doesn’t admit the shaming debt collectors into its ranks, according to José María Torres, the association’s general secretary. “They are not viewed positively,” he says.

U.S. law prohibits harassing alleged debtors with tactics such as telling friends or neighbors about their bad debts. Similarly, in the U.K., publicly humiliating debtors until they pay up would be considered unfair practice.

There are worse tactics out there, says a spokesman for Citizens Advice Bureau, a U.K. consumer-advocacy group. “We’ve also heard of debt collectors using live bears in Russia,” she says.

Mr. Llan says his method basically amounts to reminding people politely that it’s time to cough up the cash. Their response isn’t always equally polite. “Yes, I have been threatened,” he says. “You know, ‘Get out of here or I’ll break your face,’ that kind of thing.”

—Dionne Searcey contributed to this article