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On a recent Wednesday afternoon, Montserrat Vila sat in her Barcelona apartment, waiting for the bullfighters to appear. They were not coming to show off some cape work in her living room. In fact, they were not real bullfighters at all. Rather, the three men, dressed like matadors in garish tight pants and embroidered jackets, were coming to collect a debt.

It's safe to say that at the same time elsewhere in Spain, a monk, a Zorro, a clown and a Pink Panther were doing the same thing. (See pictures of Spain's Madcap Tomato Festival.)

Thanks to the country's lax debt laws, the judicial route for lenders to recover what's owed them is slow and tortuous, so many lenders are turning to a more direct approach to get their money back — tapping into the Spaniards' fear of public humiliation. As a result, companies offering costumed collectors who recoup debts simply by showing up at a home or office and embarrassing the debtor in question have proliferated in Spain. But their days may be numbered, now that a committee of the Spanish parliament has approved a proposal to regulate the industry, a first step to bringing an end to the tradition of collection via humiliation. (See pictures of the global financial crisis.)

"In this country, they treat people who owe money worse than criminals," says Vila, 49, an employee of a health-insurance company. Earlier this year, she fell behind on her mortgage payments. On March 31, she received a call from an unidentified collection agency that said it worked with the bank who had issued her mortgage and informed her that the next day it would be sending three bullfighters to "take up a collection" on her behalf from her neighbors. "I'm a serious person. I've paid my bills my whole life," says Vila. "This is a really painful situation to be in."

That discomfort is exactly what the agencies count on. The idea of using costumed collectors dates back to the 1980s, when a company, the Cobrador del Frac (or Tuxedo Collector), began sending out agents dressed in black ties and driving cars emblazoned with the company logo. Others followed suit, in ever more extravagant getups, all of them banking on the debtor's sense of shame to motivate repayment. "Personal honor, your public image, is still very important in Spain," says José Romero of the Zorro Collectors. "If one of our agents shows up at an apartment, everyone in the building is going to know there's a debtor there."

In many cases, the collectors don't say a word to their targets but instead simply follow them down the street or sit at a neighboring table in a restaurant. "We don't think of it as humiliation so much as making something public," says Miguel González of the Cobradores del Monasterio, whose agents wear monks' habits. "It's the same as with pedophiles whose names are published so that others will know."

Apparently the tactics work. The Cobrador del Frac now has 400 employees across Spain. Its commercial director, Juan Carlos Granda, says it has a 63% success rate. And with the percentage of people who default on loans skyrocketing in Spain — it reached 3.8% in January, compared with 0.95% the year before — the number of creditors who look to its services is growing. "Thanks to the [financial] crisis, we've seen about a 20% increase in business in the past year," Granda says.

The collection companies say they mainly go only after "professional" debtors: the business owner or public figure intent on gaming the system — "not families who don't earn enough to get to the end of the month," says Granda.

But at the Consumers' Union, plenty of complaints are heard from ordinary individuals. "I don't think these collection agencies are turning away clients," says José Carlos Cutiño, a judicial adviser for the organization. "And the line that they walk between persuasion and threat — between legal and illegal — is very fine."

The new legislation is intended to make that line clearer. Presented in a committee of the lower house of parliament by the Catalan party Convergence and Union on March 10, the bill is designed, according to spokesman Josep Sánchez y Llibre, "to protect citizens against those acts that attack their dignity or invade their privacy." It won the committee's unanimous support, a critical step toward becoming law.

But the Buddhas, Zorros, monks and chickens who populate Spain's collections community may face an enemy greater than new legislation: a changing sense of social shame. On an online forum for debtors, one writer, who goes by the moniker Altevere, wrote that he was expecting the chicken any day but was determined to meet him (or her?) sanguinely. "At first, I couldn't breathe, I thought my heart was going to burst out of my chest," he wrote. "But the next day I decided that even if they sent me all the collectors at once, I would simply ignore them and withstand the downpour."

In Barcelona, Montserrat Vila is similarly unafraid to meet her costumed fate. The threatened toreros didn't appear that afternoon, but she is ready for them whenever they do — with a garden hose set to spray from her apartment balcony. "I owe money, that's all. I'm not ashamed of that," she says. "They're the ones who should be ashamed."

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• Lisa Abend
• In Spain, costumed debt collectors embarrass borrowers into paying back the money they owe. But new proposed legislation could put an end to the tradition of debt collection by humiliation