You Should Be Ashamed of Yourself: Debt Collection Via Embarrassment

As a followup to yesterday’s post on how to get out of debt, I wanted to share with you an interesting article about debt collection practices in Spain…

Shame and debt

Apparently Spain has very lax debt laws, meaning that it can be difficult for lenders to recover outstanding debts by taking deadbeat borrowers to court. Thus, collection companies that specialize in shaming borrowers into meeting their obligations have proliferated.

In one case, a collection agency threatened to send three costumed bullfighters door-to-door to ask neighbors to help pay off the mortgage of a borrower who had fallen behind on their payments. In other cases, they send out collectors dressed as clowns, monks, chickens, or even Buddha to follow debtors around and shame them into paying off their debts.

While these tactics have been highly successful, the Spanish government has introduced legislation to protect citizens against debt collection practices “that attack their dignity or invade their privacy.”

What do you think?

Should these sorts of things be allowed? Or do they cross the line?

Special thanks to my lovely and talented wife, who pointed this out.

14 Responses to “You Should Be Ashamed of Yourself: Debt Collection Via Embarrassment”

  1. Anonymous

    Also forgot to note that in Spain, this same bank which kicked you out of your property and foreclosed upon you can then continue to garnish your wages if you have any or then collect by means of “embargo” which means to collect on any assets that you do have. Tell me how this is less stringent. I think the that perhaps the Spaniards at the banks think that things are “less stringent” because you can no longer go to jail for a debt, but it the laws there are so harsh that I think that it is leading to a lack of economic growth. Here you can foreclose and move on and continue to be a consumer in society buying goods and services. There if you foreclose you are driven almost to extreme poverty and to have to rely on social services and basically welfare if you have no job. The situation there is very dire and without true foreclosure or bankruptcy I don’t know how the Spaniards will get out of their housing crisis.

  2. Anonymous

    I don’t agree with the laws in Spain being lax. They are actually very stringent. There is not such thing as bankruptcy in Spain and furthermore the poor people who have lost their jobs with 25% unemployment cannot rebuild their lives or their credit. The banks can force them out of their homes through foreclosure, but it never erases the debt and they have to keep paying the mortgage. Because their foreclosure process is nothing like it is here. It is called “desaucio” which simply means to kick someone out. They kick someone out of their house, but it does not extinguish the debt. The debt remains and they have to pay it. A woman two days ago in Madrid was about to become homeless and was so upset and desparate that upon the banks agents and the court officers arriving to kick her out of her home, she committed suicide. How are these laws any more lax than in the United States? Please become better informed!

  3. Anonymous

    I think creditors should be able to use these kinds of tactics to get their money back. As long as it’s not putting anyone into physical danger. If “shaming” someone into paying their debts works, then it should be used. But I think that there should be intermediary steps – like you shouldn’t just jump from missing one payment to suddenly having clowns visiting your neighbors telling them you are a bad debtor. I also think that the government, instead of prohibiting creditors from using these kinds of creative means, should instead require creditors to work WITH debtors who are willing to settle. Not all people who are behind on their loans are necessarily trying to avoid them – some people just get in over their heads and don’t know how to get out. If someone is WILLING to work with their creditor, the creditor should cool it with the extraordinary tactics, and get a more service-oriented staff person to work with the debtor and get the thing settled.

  4. Anonymous

    In many cases, shaming someone to repay a debt may be an excellent idea, but…
    My concern is that collection agencies are getting out of control and going after people who don’t owe the debt at all! Either it’s been paid off, or they never owed it in the first place. The collectors try to scare them into paying anyway. This is becoming a common practice!
    In the days before any kind of regulation, this happened to my great-grandmother. She had bought a sewing machine from Sears, and a while after it was all paid for, collectors came to the door and threatened to take the machine away if she didn’t pay the entire amount again. She paid, because she made her living with that machine, and couldn’t afford to lose it.
    Throwing the innocent to the wolves is too high a price to pay, to make things easier for the debt collectors. Let them collect their money, but make them follow reasonable rules.
    And looking at the terms many credit card companies use, they purposely make it difficult for borrowers, because they like people to be late & in trouble, so they can get more in fees! They really don’t like those of us who pay on time!
    P.S….I don’t owe anyone anything- I recommend it- it’s a good feeling!

  5. Anonymous

    I agree with those who say this behavior should not only be allowed but encouraged. I would add that this may be good for the economy: If more people pay their loans back banks would be willing to lend more because their risk of default is lower, and their collection efforts are more successful. As was pointed out above: it is a dangerous thing when bankruptcy and default become social norms.

  6. Anonymous

    As Roger Babson once said “More people should learn to tell their dollars where to go instead of asking them where they went.”

    People usually acquire debt in a time of need. They go in understanding that once they sign that agreement, and recieve the funds, they are responsible for paying it back. IT IS NOT THEIR MONEY.

    I love people who blame wall street for the recent economic downturn. “Its the greedy bankers” many say well if people would pay the loans they were given everyone would be fine. And if the banks were to greedy they are just following societies lied who is to blame them when they learned from us it is all about keeping up with the Jones’s.

    Bottom line anyone who is owed money should be able to aggressively pursue getting their money back. And maybe we need to reevaluate our lending practices, instead of sign here to get your money maybe we should require the borrower to put some skin in the game.

  7. Anonymous

    If the government won’t allow lenders to garnish bank accounts and wages or any other reasonable way of actually collecting from the property of the defaulting debtor, then dressing up in bullfighter costumes is all that’s left.

    If the government stops them from doing that, what will be left? Who is going to lend money when there’s no way to get it back? And for that matter, who is going to bother paying it back?

  8. Anonymous

    This is a natural outgrowth of human nature and civilization. In the 17th Century US, you’d have been either thrown into debtor’s prison or put in stocks (the wooden kind) for ignoring the basic norms of the society. When a society devolves to the point that not paying one’s debts is socially acceptable, many worse things than being followed around by a clown will happen…Actually, I’d like to see it standardized a bit – someone with a big “D” around their neck following the debtor around…It’s like publishing the names of
    “johns”.

  9. Anonymous

    The justice side of me thinks, “They got themselves into the debt. They need to pay it off. Whatever the companies have to do. This isn’t taking their life (their physical breath).”

    The mercy side of me thinks, “Isn’t there a better way?”

    This is a microcosm of our issue here. We pay for things that we can’t pay for. Then we don’t pay for them. Isn’t that a form of stealing?

  10. Anonymous

    Sitting here thinking what I’d do if somebody borrowed money and refused to pay up. I think I might resort to these tactics if the person could clearly pay and decided not to. On the other hand, if I didn’t KNOW they could pay, I’d probably not resort to this as its very demeaning.

  11. Anonymous

    I think credit companies should be able to do anything (minus physical punishment) to get their money back. You can play the blame game all day, but at the end of the day if someone owes you money, it is your right to as for it back. How you ask for it back is up to you.

    You can try playing the nice guy role (which will work 1% of the time) or you can be a little more edgy and up your returns. I would take it one step further and say the government should actually do the opposite. Why aren’t they writing legislation that says “If you do not pay your debt off in X number of years, you go to jail.”?

    Speaking of debt and getting out of it, we recently had a guest blogger do a detailed 3 part story on how he got out of his debt: http://www.twentysomethingsense.com/2009/02/a-plan-a-failure-and-a-lesson-learned-part-1.html

  12. Anonymous

    It appears that lax debt laws created by the Spanish government have encouraged irresponsibility among debtors. And, in typical government style, they’re trying to be the cure for their own ill.

    It would be interesting to see what the laws in Spain say regarding owing the government money. I’ll bet they don’t allow any slack to the debtor.

    The Spanish debt problem is another confirmation that with rare exception, we get exactly what we deserve.

    Clair

  13. Anonymous

    Not to long ago, the thought of borrowing money in this country was looked down upon. In fact, it wasn’t that long since it was widely considered a sin!

Leave a Reply