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U.S. Credit Cards and Spanish Debt Collectors - A Contrast

Having more credit than money,
Thus one goes through the world

-Johann Wolfang von Goethe, Claudine von Villa Bella

April brought the prospect of changes to the lives of two different kinds of creditors in two different countries. The changes were radically different from one another. In the United States it was proposed changes to the rules governing institutions that issue credit cards to the consumer.

For years, issuers of credit cards saw themselves as the consumers' friend. They provided the consumer with the means to instant gratification in the world of acquisitions in which we live. Being self-interested, as well as generous, however, they appropriately believed they should get some benefit from their good works as well. In doing so they took as their tutors the lame fox and the blind cat in Carlo Collodi's Pinocchio.

When Pinocchio was befriended by the lame fox and the blind cat he was persuaded by them to bury the remaining four gold coins he had been given to help his poor father, Geppetto. The two animals assured Pinocchio that the coins would grow into a tree with a thousand gold coins. When Pinocchio returned to the burial plot a short while later he discovered that not only had the tree failed to sprout but the four coins had joined the cat and the fox and left the burial place.

The credit card companies are no different from the cat and the fox. They fill the mailboxes of the consuming public with the enticing prospect of credit at little or no interest for the first few months, only to begin charging much higher interest at the end of the free period. (In 2008 the industry sent out 4 billion invitations to prospective customers urging them to accept the solicitor's card.) In addition to the interest rate rise that is explicitly described in the solicitation, many issuers provide for increases in fine print where its cardholders may not notice.


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Wilma Erwin can explain. She has had a Discover Card for 18 years and always made timely minimum payments. On March 13, 2009, Discover Financial Services received TARP funds of $1.2 billion. Inspired by its windfall from TARP and eager to further enhance its financial position, on April 15 it raised Ms. Erwin's monthly interest rate from 10.99 percent to 15.24 percent for no particular reason, she having paid her bills on time for 18 years. Discover was able to do this because buried deep within the fine print in the credit card agreement were provisions giving the issuer the right to raise the interest rate for a multitude of reasons, many of which, like Ms. Erwin's, are unrelated to the holder's payment history.

If the Credit Cardholders' Bill of Rights Act of 2009 becomes law, many of the abuses enjoyed by the card issuers will be outlawed. The Bill has passed the House and gone to the Senate where a stronger version and a doubtful future await it. To date no Republican in the Senate has announced support Opponents' reasons are no doubt legion but are probably best summed up by Rep. Pete Sessions of Texas who said: "People who get credit cards have a responsibility, when they sign a contract, to live up to that responsibility. It's not a right." He may want to mention that to Ms. Erwin.

In Spain, reforms took the form of taking some of the fun out of debt collection practices that have been followed there since the 1980s. According to a recent report in Time, on March 10 a committee of the Spanish lower house of parliament unanimously approved a bill that a spokesman said was designed "to protect citizens against those acts that attack their dignity or invade their privacy." It was not referring to arbitrary increases in interest rates that American citizens enjoy. The acts that were complained of had to do with collection practices. According to Lisa Abend who wrote the story for Time, Spanish debt collectors have employed the tactic of publicly humiliating the debtor. To do this, they dress up as if they were actors in a theater.

Ms. Abend reports that Monserrat Vila, who fell behind on her mortgage payments, received a call from a collection agency advising her that the next day people dressed as bullfighters would visit her neighborhood and take up a collection from the neighbors to help her pay her debt. The embarrassment for Ms. Vila was probably more certain than the likelihood that any funds to apply to her debt would be received. One agency's collectors dress up as monks and another's appear in tuxedo. Sometimes the costumed collectors follow the debtor into restaurants sitting near the debtor hoping thereby to embarrass the debtor. (The owner of one collection agency with 400 employees around Spain says his costumed collectors have a 62 percent success rate.)

If the Spanish law passes, Spanish debtors will no longer be surprised by costumed debt collectors. If the Cardholders' Bill of Rights passes, American taxpaying card holders and taxpayers will no longer be surprised by the sleazy practices employed by the very banks that have just been saved from extinction by their taxpaying cardholders.

Christopher Brauchli

Christopher Brauchli

Christopher Brauchli is a columnist and lawyer known nationally for his work. He is a graduate of Harvard University and the University of Colorado School of Law where he served on the Board of Editors of the Rocky Mountain Law Review. He can be emailed at For political commentary see his web page at

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