2011-03-30-Debt Collection Turning Nasty

Debt collectors turning nastier

DEBT collection is now one of the few fast-growing businesses in Spain. And tactics in this unregulated sector are growing increasingly murky and nasty.

Most Spanish companies are now saving staff time by passing their unpaid demands to special debt-collection firms.

It is estimated there are now about 800 of these collection companies in the country (although there is no central register) and the number is growing quickly.

With the economic crisis biting ever deeper, business for the collectors is booming. It is thought these companies are now trying to recover 61 billion euros of the 105 billion owed by debtors in Spain.

Jose Maria de Gregorio of the national association of collection agencies, said: "The economic crisis is now so deep that the possibility of collecting money has nosedived. It's not that people don't want to pay, it's that they can't."

Obviously the mortgage - the biggest household loan - is the families' first priority because they don't want to lose their homes (although despite that last year there were 93,622 houses embargoed, four times the number of 2007).

So car loans, current account overdrafts, HP on household goods... are all shoved into the background as families fight first to save their homes.

This is where the debt collection agencies move in, anything from lone private detectives to multinational organisations based in Scandinavia to investment companies looking for a quick buck to call centres with hundreds of employees...
They work on a very vague rule-of-thumb: when someone is a month behind on a loan payment they reckon there is an 80 per cent chance of recovering it. But when a year has been missed the chances crash to 20%. As for credit cards, their 'collectability' goes from 75% in the first month to 5% after a year. But the big problem here is that Spain and Portugal are the only two countries in the European Union in which there are no national rules and regulations restricting the methods used by debt collectors.

Most start off ok according to research by El Pais newspaper, with a pleasant telephone call, text message or letter explaining the amount owed and offering a deal for an affordable part payment in order not to get too far behind.
That's where the softly-softly approach ends. The next communication shows the legal demand the company will present to the court if the debt is not paid. In fact this is only an example of the kind of demand that could be made, but it looks real enough.
In the third stage the agencies warn the debtors of the consequences of non-payment; embargoes of their income and goods, inclusion on lists of bad debtors...

Finally a letter or text warns of the consequences of being on the bad-debtor lists, including the impossibility of ever asking for another loan or mortgage and inability to hold credit cards.

That threat of being on the naughty boy/girl list and incurring an ipso fact embargo is the greatest scare tactic. Most people don't know exactly what happens if they don't pay their bills on time and they are easy prey.

In fact any embargo of that nature would only come after a long and expensive judicial process which the collection companies - working on commission - would be unlikely to start. But the poor punter doesn't know that and suddenly can't sleep.

Yet believe it or not, this is how the 'well behaved' companies conduct their business, the ones following their own self-imposed rules of ethics. When it comes to the cowboys anything goes.

One collector recently told a debtor known to an El Pais reporter: "Right, I'm going straight to the court on Monday unless you make the repayment and I'm going to present the legal demand." Um, that whole sentence is a lie - the collector himself would never go to a court, he would not be able to check whether the person had made the payment and in fact has no right to decide which cases should end up in court anyway.

Then the threats and scare tactics can become relentless with the debtor on the receiving end of an avalanche of calls, registered letters, faxes, text messages and even personal calls demanding immediate repayment.

The calls come at any time, first thing in the morning or last thing at night, from special lines that block their identity or automatically change their numbers so you can never know who's calling. Finally the collectors can make the final step over the borderline of legality and start making threatening calls to family members, work colleagues and neighbours, leaving the debtor in a state of total humiliation.

There are other little tricks, too, such as phoning neighbours claiming you work for the Post Office and leaving a message for the debtor to call a certain number in order to retrieve a package.

Or another obvious one for the collection agency callers to claim they are from the company to which the person directly owes the money (If you are called by a collection agency you really can tell them to bog off because you never signed a contract with them so they have no legal power over you).

Oh, and if you are bothered by one of these agencies, nip down to your local OMIC municipal consumers' advice centre or even better contact the AEPD data protection agency. You can give them some of their own medicine.