Do you have a garnishee order against you? Is your credit provider demanding more of your income than you can afford to pay back every month? Are you sure that you have paid back more than you should have by now, but the garnishee order is still in place?

The Credit Ombud is urging all people who have garnishee orders (the correct term for them is emolument attachment orders) against them to have them checked to assess whether they were legally issued and are fair and valid. And the good news is that you don’t have to go to a lawyer and pay legal fees to get your garnishee order checked – the Credit Ombud will do it for you, for free.

In fact, the Credit Ombud is advising ALL South African borrowers with garnishee orders against them to have theirs assessed, because even if they were legally issued, the amounts owed or fees charged are often incorrect.

How to get your garnishee order checkedYou will need to request a copy of the garnishee order from your employer, which will show the court at which it was issued, the case number and the name of the credit provider. It will also help if you have any documentation relating to the granting of the loan. The Credit Ombud will then be able to:

• Check that the loan agreement complies with the relevant legislation.
• Check that the correct interest rate and fees are being charged.
• Look at the affordability of the lending agreement to ensure that the lender didn’t lend you more money than you could afford in the first place.
• Ensure that the garnishee order court order was issued in the correct court and for the correct amount.
• If the implementation is legal and correct, the Credit Ombud will request a full statement of account showing all the payments and charges, to ensure that the balance that you still owe is correct.
• If the order was not lawfully obtained, the Credit Ombud will negotiate with the attorneys involved to have the order rescinded at their own cost. They will not go so far as to take legal action on your behalf, but they do find that if the facts and the law are in your favour that it is not difficult to persuade the other party to resolve the matter.

Why are garnishee orders in such disarray? When a person has been unable to pay back their debts, the creditor can take out a garnishee order against them. This means that the credit provider serves a court order on the borrower’s employer, instructing them to deduct a portion of their salary every month to pay back the debts.

However, a number of unscrupulous lenders have been abusing garnishee orders, having them granted by clerks of the court instead of a magistrate, which bypasses the proper legal steps to assess affordability. The garnishee orders are also often taken out at a court far from where the borrower lives or works, so that they can’t be queried. As a result of this, the order can demand more than the borrower can afford to pay back every month, and is then often not cancelled when the debt has been repaid, meaning that the lender continues to take the repayment amount from the employer every month.

Garnishee orders are getting attention at the moment because a recent court case has ruled that garnishee orders issued by clerks of the court are unconstitutional and cannot be enforced. The case will now be taken to the constitutional court for a rewriting of the law to clarify that magistrates themselves must issue the garnishee orders, after having taken the financial situation of the borrower into consideration.

Don’t become a victim of unscrupulous providers Before the court case was concluded, the Banking Association and various other credit providers had already formed a National Industry Steering Committee to deal with the problem of unethical garnishee orders. They have written a Code of Conduct that all members agree to uphold. You can see a full list of signatories to this Code of Conduct at the bottom of this blog post. If you take out credit with any of these organisations, you can be confident that if you are unable to repay the loan and you are served a garnishee order, the lender will comply with these conditions:

• Garnishee orders will only be used as a last resort, after a consumer has missed three months of instalments and they have defaulted for longer than six months, and all other attempts to get the money paid back been unsuccessful. So the garnishee order will only be served after the borrower hasn’t made repayments for nine months in total.
• Only a court that has jurisdiction over the consumer – which means that it is close to where the consumer lives or works – can issue a garnishee order.

An affordability or financial assessment must be carried out, taking into account all debt obligations and living expenses, to ensure that the borrower can support himself or herself and their dependants before paying back the instalments.

The way forwardIt seems that in future, garnishee orders will be issued far more ethically by the Magistrates Court, and that credit providers will have to be more conscientious about how they apply them. This is good news for people who are struggling for whatever reason to pay their debts.

However, the best way to avoid getting into these kinds of legal situations is to avoid going into debt if at all possible. If you must take out a line of credit, do it through the National Industry Steering Committee members who have signed the Code of Conduct, and then ensure that you make payments in full and on time. If you are not able to do so for any reason, contact the credit provider immediately to make a new repayment plan.

Top tip: Did you know that South African employees spend three working hours a week dealing with their personal financial issues? Why not talk to your employer about setting up a financial wellness programme? Follow the link for great ideas on how to kick-start the initiative in your workplace.

The National Industry Steering Committee is made up of the following members:

• Banks - African Bank, ABSA Bank, Capitec Bank, First Rand Bank, Nedbank, Standard Bank, Ubank; and
• Non-Bank Credit Providers – MFSA (Micro-finance South Africa), Shoprite, Lewis Group, Non-Bank Motor Financiers Association (NMFA) & TFG (including PCVR, NRB, Landay Attorneys, Truworths, Woolworths) & LNBLA (Large non-Bank Lenders Association) comprising of Old Mutual Finance (PTY) Ltd, Home Choice, Fin Choice, JD Group, Direct Axis SA (Pty) Ltd, RCS Investment Holdings (Pty) Ltd, Real People (Pty) Ltd, Bayport Financial Services.