The phrase "debt collection" carries different connotations depending on who's hearing it. For a consumer, it conjures images of aggressive phone calls about credit card balances. For a CFO with €200,000 in unpaid invoices from a Spanish distributor, it means something entirely different — a structured commercial process designed to recover legitimate business receivables.
Understanding the distinction matters because the approach, the legal framework, and the expected outcomes are fundamentally different.
Consumer Collection vs. Commercial Collection
Consumer collection involves recovering debts owed by individuals: credit cards, personal loans, medical bills, utility arrears. It's heavily regulated (FDCPA in the US, similar frameworks in Europe), involves high volumes of relatively small debts, and relies on standardised processes. Recovery rates are low (industry average 20–25%) because individual debtors often lack the means to pay.
Commercial collection involves recovering debts owed by businesses to other businesses. The legal tools are different, the regulation is lighter, and the debtor dynamics are entirely different. A company that owes you €150,000 has a registered office, filed accounts, identifiable assets, and a commercial reputation it wants to protect. These structural factors create settlement incentives that don't exist in consumer collection.
For overseas creditors with Spanish commercial debts, the relevant framework is commercial collection — and the results are substantially better than the headline consumer statistics suggest.
How Commercial Collection Works in Spain
The process follows a structured escalation path designed to resolve the debt at the earliest (and cheapest) possible stage:
Amicable collection. A Spain-based agent contacts the debtor directly through phone calls, formal demands (via burofax for legal weight), and field visits. This phase resolves 70–85% of commercially viable debts referred within 90 days of default. Cost: 5–15% of recovered funds on no-win, no-fee terms.
Pre-legal escalation. A formal demand from a Spanish attorney, referencing Ley 15/2010 and naming the court procedure that will follow. Resolves a significant additional proportion of resistant debtors. Cost: €300–€800.
Legal proceedings. Monitorio payment order for documented debts (30–45 days to enforceable judgment for uncontested claims) or full civil proceedings for contested debts (6–18 months). Cost: €1,000–€15,000 depending on procedure and complexity.
Enforcement. Bank garnishment, asset seizure, property charges. Executed through Spanish courts by your agency's legal team.
The Economics of Commercial Collection
The calculation is straightforward. Take a €100,000 commercial debt, 90 days overdue, with solid documentation:
Expected recovery (amicable): €75,000–€85,000. Commission at 8%: €6,000–€6,800. Net recovery: €69,000–€78,200. Compare that to writing off €100,000.
Even in a scenario requiring legal proceedings (adding €3,000–€5,000 in legal costs and longer timelines), the expected net recovery typically exceeds €60,000. The economics are compelling for any commercially viable debt above €15,000–€20,000.
Common Misconceptions
"Collection agencies are aggressive and damage relationships." Consumer collection has a reputation problem. Commercial collection is professional, structured, and often preserves the business relationship. A competent agency's goal is recovering the money — not antagonising the debtor into prolonged resistance.
"I can collect just as well internally." Domestically, possibly. Internationally, almost certainly not. Your internal team lacks physical presence in Spain, legal capability in Spanish courts, and the cultural context that makes collection in Spain effective.
"Collection agencies charge upfront fees." For amicable commercial collection, no-win, no-fee is standard. You pay nothing unless money is recovered. Agencies that charge upfront fees for the amicable phase aren't operating on a genuine contingency model.
FAQ
When should I engage a collection agency vs. continuing internal efforts?
If your internal team hasn't produced results within 60 days of the payment being overdue, professional collection is warranted. Every month past day 60 reduces your recovery probability without improving your position. The cost of engaging an agency (zero upfront on no-win, no-fee) is always lower than the cost of further delay.
Is "collections" the same as "debt collection"?
In commercial practice, "collections," "debt collection," "debt recovery," and "credit recovery" are largely interchangeable terms for the same process: recovering money owed to you by a debtor who hasn't paid. The terminology varies by region and industry, but the underlying process and legal framework are the same.
Alan Perez
💥 World citizen / 🛵 Tourist, Senior Debt Collection Manager, Business Debt Claims Expert
