Garnishees and your rights

Garnishee orders – emolument attachment orders (EAO) – are a court-sanctioned solution to the problem of debtor default. Strictly speaking, the terms are not interchangeable. Having said that, the two terms have become irreparably linked in media coverage and in the vernacular. Most of what people call “garnishees” in South Africa today are actually EAOs.

EAOs are legal, court-issued documents, served on the employer of the debtor, to compel the employer to garnish the employee-debtor’s wages against outstanding debt. These are largely administered under the Magistrates Court Act of 1944 (MCA), the National Credit Act (NCA), The Debt Collectors Act, and a few other pieces of legislation such as the Basic Conditions of Employment Act.

In July 2017, the Court of Law Amendment Bill was signed by then-President Zuma to amend elements of the MCA – flowing from the 2016 Constitutional Court ruling. A critical change in the Court of Law Amendment Act is the limiting of garnishees as a proportion of income. No more than 25% of a debtor’s basic income can now be garnished.

TRICKY NUMBERS

No one knows how many people with garnishee orders there are in South Africa. Fact is, there is no single database of garnishee information. In 2012 Moneyweb claimed that 10% and 15% of South Africa’s workforce had garnishees against them. The same year Fin24 wrote that there were between three and five million active EAOs.

The bible of garnishee research is probably “The Incidence of and the undesirable practices relating to garnishee orders in South Africa”, a report published in 2008 by the University of Pretoria. In 2013, the UP Law Clinic released a “follow up” report. Together these are arguably the most comprehensive studies on garnishees. Working backwards from the stats per industry that these reports provide, it is clear that there are at least 1.2 million people with EAOs in the workforce.

LEGAL FRAMEWORK

The UP report highlights five common areas of abuse in garnishees, and the 2017 Court of Law Amendment Act addressed two of these. Specifically one and two in the list below:

  1. Jurisdiction: the court of Where? This is an ‘access to justice’ concern, as debtors and the garnishee should be logistically able to appear in court and make representations on the matter. A debtor can consent to waive this right, and the report found that often debtors have been duped into consenting or, not uncommonly, consent is simply faked. The effect is that unscrupulous attorneys used to take their application to more sympathetic courts, and / or push them through littered with dodgy numbers knowing that the debtor won’t appear in court to dispute these.
  2. Clerks vs Magistrates The MCA empowers a magistrate to grant EAOs, but another clause used to gives clerks the go-ahead here. The result is that often it was the clerks processing the orders, and stamping these into officialdom. There are accusations of clerks being bribed, and of clerks skipping over the affordability concerns and approving whatever is put in front of them. Now this has been clarified and requires that a magistrate must pass these. 
  3. But I never consented Debtors report signing blank consent forms at the credit origination, or being bullied into consent to jurisdiction changes. They also report consenting to judgment (a method of skipping major steps in obtaining an EAO) should they default in future, without knowing what they are signing. Again, forgery of signatures is a common complaint.
  4. I owe how much?! The UP reports document numerous affordability problems, overcharging and in duplum errors on EAO documents. In duplum limits interest to no more than the original capital amount. The researchers report seeing double  charges, mis-captured original credit amounts and unregulated lawyers fees that can only be described as gouging.
  5. Free-range lawyers Unlike credit providers who are regulated by the NCR and debt collectors who fall under the Council of Debt Collectors (CDC), lawyers fees relating to EAOs are uncapped, and they can charge for every action relating to the order. The Attorney’s Act, the follow up report says, leaves the matter of fees up to the law societies to manage. 

Additionally, Summit Financial Partners – a “financial wellbeing firm” that does a lot of consumer and legal work in this area, recently reported seeing thousands of outright faked EAOs in payroll records. These are orders that never appeared in court, but were sent to employers as if they had.

If you have a garnishee against your income, and believe that you have been a victim of any of these practices, you should seek help. Ask your payroll administrator to check the details. Or take your case to the Credit Ombud.

GLOBAL GARNISHEE USE

The Court of Law Amendment Act limiting of garnishees to no more than 25% of a debtor’s basic income brings South African garnishee law closer in line with other territories – such as roughly half the US states – that limit garnishees to similar levels. But many developing states have taken a more protective stance. The Dominican Republic, Brazil, Ecuador, Mexico, and Uruguay all shield wages from legal attachment (except for spousal or dependent maintenance obligations), and in Sri Lanka, the wages of public officers, labourers and domestic servants cannot be legally attached.