garnishee

South Africans are drowning in debt! According to the National Credit regulator, debt counsellors have assisted over indebted consumers with repayment plans worth up to R18 BILLION in total. Statistics show that by 2013, about 240 034 government employees and about 120 000 private sector employees had emolument attachment orders (a garnishee) against their salaries.

WHAT IS AN EMOLUMENT ATTACHMENT ORDER (EAO)? 

 

Often incorrectly referred to as a garnishee, an EAO orders the employer of the debtor to religiously deduct money directly from the debtor’s salary each month in order to ensure prompt payment to the credit provider. 

 

HOW DOES IT HAPPEN? 
  • When the consumer/ debtor breaches the terms and conditions of the loan agreement by failing to pay in terms thereof, 
  • the creditor can take action by sending letters of demand, summons, obtaining a court order against the debtor, and then lastly using the court order to enforce payment by applying for an EAO or warrant of execution…
OR 
  • The creditor can ask the debtor to sign a consent to judgment form, in terms of which the debtor consents to the judgment debt and agrees to the EAO against his/ her salary; 
  • Section 58 of the Magistrate’s Court Act 32 of 1994 deals with consent to judgment applications; 
  • In the year 2010 it was decided by the court in African Bank Limited v Additional Magistrate Myambo that section 58 of the Magistrate’s Court Act remains unaffected by the National Credit Act (which offers protection to consumers). The court ruled that credit providers may continue to make use of consent to judgment applications in terms of section 58; 
  • Note that it is unlawful for the creditor to request a signed consent to judgment form prior to granting you a loan/ you falling into arrears. Therefore, always remember to check the dates. 
IMPLICATIONS OF YESTERDAY’S WESTERN CAPE HIGH COURT RULING BY JUDGE SIRAJ DESAI (08/07/2015): 
    • Certain sections of the Magistrate’s Court Act regarding emolument attachment orders have been declared unconstitutional. We applaud the University of Stellenbosch’s Legal Aid Clinic who brought this application on behalf of 15 financially distressed low-income consumers; 
    • However, remember that Constitutional invalidity needs to be confirmed by the Constitutional Court; 
  • Should the Constitutional Court confirm this order: 
a) Credit providers may no longer obtain an EAO against the debtor’s salary by way of the debtor merely signing a consent to judgment form! 
 

b) Judicial oversight will be required. In other words, the Magistrate needs to consider the financial implications of the garnishee against the debtor first;

c) Judge Desai furthermore pointed out that consumers/ debtors may not be coerced into agreeing to a Magistrate’s Court in the jurisdiction/ area outside of where the consumer lives or works. This is often done as it is convenient for a credit provider to rather make use of the Magistrate’s Court in its own area.