Reckless Lending: no to the garnishee order


Reckless lending is taking knocks, left, right and center

Reckless lending is a huge financial burden on some and is still prevalent across South Africa today. This occurs when credit providers enter into a credit agreement and the debtor does not have the means to pay back the amount. Never mind covering the cost of living expenses.

An Emoluments Attachment Order, otherwise known as a garnishee order, is a legal notice to employers to deduct a portion of an employee’s salary in order to pay off their debt. Without judicial oversight, issued by clerks and often without consent of the debtor, many end up losing their means to daily living by losing their income to these unapproved transactions. Times, however, are changing.

A hot topic that has caused trouble for both Capitec and African Bank earlier this year, the fight against reckless lending and garnishee orders has now won another victory for the financially unsound.

The ball’s in their court…so to speak

With a Constitutional Court’s ruling earlier this year, the garnishee order as we know it could be a thing of the past. High Court Judge Siraj Desai, of the Western Cape Division, ruled that employers in the Western Cape are exempt from enforcing these garnishee orders against their employees, when they were obtained outside the province. Following this precedent, similar moves and appeals have been made in other jurisdictions, prompting a revision of the laws and regulations surrounding creditors lending.

The decision prompted a judgment by the Constitutional Court requiring judicial oversight when issuing these emolument attachment orders- meaning these orders can only be issued my magistrates rather than clerks. To correct past mistakes, protecting the consumer, allows the debtors to defend themselves and oppose the order at a higher level.

Brought to the attention of the courts in recent years, clerks would issue these orders without copies of claims or even consent documents from the debtors. Jurisdiction was also a huge issue as many of the consent documents were being kept in different area and were not being transferred to the courts where the orders were issued.

With such a large impact on the flow of reckless lending, these orders allowed funds to be recouped by creditors while the debtors were unable to sustain themselves and their families. This is a huge problem in the financial world of South Africa. With an unreal amount of cases coming to light, it would seem this once unknown set of circumstances is slowly being unveiled as one of the thorns in the side of the impoverished.

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