Business & Economy

Thursday, 07 May 2009 10:19

Fraud and poor training at magistrates courts see workers overburdened with garnishee orders

{pp}Major debt counselling organisation Consumer Assist warns that part of the problem is uninformed court officials & stats back that confusion and fraud around garnishee orders from South African courts is seeing around 20% of employees in South Africa crippled by often fraudulent demands for payment being taken off their salary, with high numbers of employees working all month to take nothing home because of debt.

A growing body of research is showing that a considerable number of those garnishee orders are illegal or fraudulent. Agencies that are expressing increasing concern to government include Consumer Assist, Debt Control Management, the Pretoria Law Clinic, the National Credit Regulator and international development agency GTZ has found. Yet neither the Department of Justice or parliament have taken no steps to rectify the situation. Significant percentages of magistrate court officials do not understand the legal requirements around emolument attachment or garnishee orders (17% in Gauteng don't understand them and only a quarter of clerks of civil courts the North West province know how to correctly process these orders), according to research by the Law Clinic of the University of Pretoria. A recent case by the Council for Debt Collectors against Pretoria firm Kochnel, Bantjies and Partners found discrepancies and fraud on garnishee orders supposedly approved by the Johannesburg Magistrates Court and issued at the behest of a major bank.

Research by government shows that 20% of its employees have garnishee orders totalling R1,01 billion against them. Unions claim that in 80 percent of cases overburdened clerks of the court are overlooking the fact that applications are invalid because a judgment has not first been brought against the worker. Employees are also often made to sign consents to judgment for unspecified amounts, which contravene magistrate court rules. Andre Snyman, CEO of Consumer Assist the largest debt counselling organisation in South Africa called for an urgent review of the legislation around garnishee orders and increased training for court officials. "Companies also need to introduce financial wellness programmes for staff along with debt counselling to control the problem," Snyman said.

In the National Credit Regulator's latest annual report, CEO Gabriel Davel expressed concern about "the capacity of the Magistrates Courts to interpret and apply the National Credit Act. This is impacting both on applications for debt restructuring and on the normal process of contract enforcement and applications for judgement. We have engaged with the Department of Justice and Constitutional Development on these issues, and the NCR together with USAID contributed to the cost of training for magistrates." A study by GTZ showed that 83% of employers - who deduct the money from staff salaries - "do not know the rules regarding jurisdiction" and so they deduct the monies even if legally unlawful. Snyman said too that: "It is a troubling statistic that according to research by Finmark Trust issued late last year, the 'main driver of debt was to buy food, ten percent of SA adults or nearly 3,2m people said they had borrowed money for food in the past year.' The Finmark Trust survey also noted that most people who borrowed money did not fully understand the terms and conditions of the loan. Too few know where to go for help if they get into trouble and so Consumer Assist is trying to educate the public to go for debt counselling before judgements are taken against them. "We had a case of a labourer who paid more than R36 000 more than he should have on a garnishee order, but corrupt lawyers did not bother to tell him. We found out through checking then hired a private investigator to find the man who had left his job and previous home and give him the money he was owed."

Snyman said that they were experiencing significant success with financial wellness workshops in companies that ranged from retail houses to major financial institutions and big factories. Last year BMW released the results of financial wellness workshops that raised productivity at their plants. It began after a survey by the National Automotive Bargaining Council in 2006 at the instigation of Numsa found that at all automobile plants had between 10 to 100 employees had negative pay packets because of garnishee orders. In other words, those workers worked all month and took nothing home at the end of it because of court orders against them. A third to half of the rest had 25% of their salaries consumed by debt. BMW introduced a programme of financial wellness similar to a model used in Cologne, Germany. Because debt carries a similar stigma to HIV and AIDS, they also used the counselling skills of HIV counsellors to assist severely indebted workers of whom 45% took part in the course. Not all course participants were in severe debt however, but feared they could land up in trouble because of ongoing pressure to spend from their families or a sudden crisis, for example, the death of a family member. By implementing financial wellness programmes BMW was able to halve, every year from 2006 to 2008, the number of severely indebted among its staff and introduce financial coping mechanisms among employees. There was also a 42% decrease in judgement orders against staff. And more employees invested - from none reinvesting their pension fund monies to 23% of employees who left the company in 2008. There was also a 34% decrease in absenteeism among those attending the financial wellness programme.

A similar programme run by SA Breweries commenced after they realised that a third of staff had low productivity because of financial stresses. SAB realised that loans to employees often worsened financial debt instead of assisting; they discovered that teaching sound financial management skills is critical for long lasting benefits. At a seminar conducted by the National Credit Regulator and funded by GTZ, a third of attendees felt that emolument attachment orders similar to garnishee orders should be abolished. There was consensus that magistrates courts employees did 'not always adequately understand the legislation or process, nor always pick up flaws that were damaging to the indebted person.' The GTZ/NCR workshop suggested debt counsellors should check garnishee orders before they went to court to ensure that they conformed to the letter and intent of the law. There was also a suggestion that lawyers who collect debt be registered with the NCR. "There is an urgent need to encourage companies to run financial wellness programmes nationwide to help employees cope, and in turn to reduce fraud, poor productivity and anything that contributes to retarding South Africa's economic progress," Snyman said. "But at the same time lawmakers need to urgently revise legislation around the Magistrates Court Act, as well as garnishee orders to ensure it comes into line with the intent of the National Credit Act."

Contact information:
0861 21 22 23
debt counselling call centre
Andre Snyman - CEO - Consumer Assist
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(Languages: English, Afrikaans)

Issued by:
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011 646 7637 or 021 762 2656
Charlene Smith Communications (Pty)Ltd

Contact: Leila Beltramo
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Tel: 021 762 2656

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