In top hat and tails, Spanish debt agents prosper

MADRID (Reuters) - 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.

Manfred Gunther of the Spanish company The Cobrador del Frac (The Debt Collector in Top Hat and Tails) takes an elevator in Madrid August 12, 2008. If more confirmation is 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 movie to humiliate debtors into paying up. Its business is booming. REUTERS/Juan Medina

That’s a translation to English of “El Cobrador del Frac”, the name of a company which specializes in sending men dressed like extras from a 1930s Fred Astaire movie to humiliate debtors into paying up. Its business is booming.

“At the start of the year we noticed demand was increasing,” said Juan Carlos Granda, 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 -- female debt collectors are not employed by the company as they are not deemed imposing enough -- and the walls studded with hunting trophies.

Together with a significant collection of antlers and a pair of elephant tusks, there are two lion heads, as well a hyena and an antelope, looking as well and truly beaten as the most crushed of debtors.

With Spain’s economy on the edge of recession as a property bubble crumples, Granda expects the 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 percent 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 percent the highest in the European Union and well-known companies like property firm Martinsa Fadesa filing for administration, the issue of how to get people to pay what they owe has become more vital.

Banks have seen bad debts jump 164 percent in 12 months to 1.6 percent of loans, still a respectable level by international standards although the Bank of Spain expects it to rise.

Slideshow ( 3 images )

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 percent.

The privately owned firm has over 550 employees in Spain and Portugal, and just hired an extra 70 or so to deal with demand. Granda declined to provide financial details, but said most new business is coming from the building trade, such as constructors unable to meet bills for supplies.


Granda refers to the top hats and tails, whose appearance has unnerved so many Spanish debtors, as the company “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 told Reuters.

The company usually starts with a phone call and a warning, or a demand for payment via fax. If that doesn’t work, the approach becomes more aggressive, although Granda said his men always stayed within the bounds of the law.

“If you’re a debtor, I’ll make sure that everyone who knows you knows that you owe money,” Granda said: “Your neighbors, your clients, your suppliers. You’re not going to like that.”

Consumer groups don’t like it either.

Enrique Garcia, spokesman for Spain’s Consumers and Users Organisation, said complaints against debt collecting firms such as the Cobrador del Frac were rising as the economy turned ugly.

“The way these companies approach consumers often borders on being illegal,” Garcia said.

“They threaten legal actions, or invade privacy,” he said, adding he expected complaints to rise further by the new year when workers unemployed for over a year lose state benefits.

In many other countries, the techniques employed by the Cobrador del Frac, which has been copied in Spain by smaller outfits which collect debts dressed as clowns, monks or as a masked Zorro, would not be permitted.

Britain’s Office of Fair Trading describes “acting in a way likely to be publicly embarrassing to the debtor” as unfair practice, adding that failing to conceal debt-notices in envelopes could be embarrassing if neighbors saw them.

But embarrassment is what the Cobrador del Frac is all about.

In one spectacular case, in which it was seeking to reclaim a large debt for an unpaid wedding banquet, the company even resorted to phoning guests who had attended to demand they pay their share of the bill. The red-faced bride and groom soon coughed up, Granda said.

Meanwhile, Granda is 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 Cobrador del Frac collector Manfred Gunther, describing how Spanish-domiciled Germans react when he shows 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.”

Editing by Sara Ledwith