Hat's the way to shame debtors into paying their dues

Published on Thursday 21 August 2008 22:35

IF MORE confirmation were needed of the funereal state of Spain's economy, it can be found in the shape of The Debt Collector in Top Hat and Tails.

That's a translation to English of "El Cobrador del Frac", the name of a company which specialises in sending men dressed like extras from a 1930s Fred Astaire film to humiliate debtors into paying up. Business is booming.

"At the start of the year we noticed demand was increasing," said Juan Carlos Granda, the head of El Cobrador del Frac's international department.

Working with a theatricality that would not be tolerated in many countries, the company's Madrid headquarters has a distinctly macho atmosphere.

Its offices are full of men in dark suits – the company does not employ female debt collectors because they are not deemed imposing enough.

With Spain's economy on the edge of recession as a property boom crumples, Mr Granda expects El Cobrador del Frac to enjoy years of bonanza as it clears up debts left by consumers and companies during years of financial fiesta.

Spain's household debt is at record levels, above 120 per cent of gross domestic product, a result of the easy credit facilitated by euro membership which long allowed people to live far beyond their immediate means.

The corporate sector, especially in property and construction, is also struggling to make ends meet as the housing market freezes and the value of property assets becomes increasingly doubtful.

With unemployment of 10.4 per cent the highest in the European Union, the issue of how to get people to pay what they owe has become more vital.

Banks generally collect their own debts, but many companies with unpaid bills turn to debt collectors like El Cobrador del Frac, which buys debts at a discount before trying to collect them. It claims a success rate of about 70 per cent.

Mr Granda refers to the top hats and tails, whose appearance has unnerved so many Spanish debtors, as the company's "uniform".

"We send collectors in uniform and collectors without uniform. It depends on how the debtor reacts. If we need to do it to collect a debt, we send a collector wearing top hat and tails, so his debt attracts more attention," he said.

"If you're a debtor, I'll make sure that everyone who knows you knows that you owe money," Mr Granda explained. "Your neighbours, your clients, your suppliers. You're not going to like that."

Consumer groups don't like it either.

Enrique Garcia, a spokesman for Spain's consumers and users organisation, said complaints against debt-collecting firms such as El Cobrador del Frac were rising as the economy turned ugly.

Embarrassment is what El Cobrador del Frac is all about.

Mr Granda is now eyeing a new profitable market: foreigners living on Spain's coasts who believe they have left their debts behind in their home countries. The company is employing immigrant collectors to deliver the bad news to their compatriots in their native languages.

"At first they're astonished," said a Cobrador del Frac collector, Manfred Gunther, describing how Spanish-domiciled Germans reacted when he showed up on their doorstep in costume. "Then they do everything they can to make sure you don't come back. And there's only one way to do that: by paying."