2015-07-23

Creditors warned about attachment orders

Cape Town - Justice Department has urged creditors and their attorneys to study a judgment declaring emolument attachment orders (EAOs) against a group of Stellenbosch workers illegal and unlawful, and to rescind EAOs that have been obtained illegally.

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The department also urged employers to be proactive and negotiate with creditors to withhold the orders until the Constitutional Court ruled on the validity of clerks of the court to issue EAOs without judicial oversight.
An EAO is a debt recovery legal instrument that allows for a portion of a debtor’s salary to be deducted and paid directly to the creditor.
Earlier this month Western Cape High Court Judge Siraj Desai struck a blow for poor people exploited by microlenders when he declared EAOs against a group of Stellenbosch workers unlawful.
The Stellenbosch University Legal Aid Clinic took up the case of the group of low-income earners in and around Stellenbosch.
Some had had almost half their salaries deducted, some were charged up to 60 percent interest and some of the loans were in contravention of the National Credit Act.
The EAOs of the workers had been obtained in magisterial districts as far away as Kimberley and Winberg, which Desai said was illegal.
Desai said part of the Magistrate’s Court Act, which allowed for clerks of the court to issue EAOs without judicial oversight, was inconsistent with the constitution.
Clinic director Kruger van der Walt last week brought an application to the Constitutional Court to both rule on the constitutionality for clerks of the court to issue EAOs without judicial oversight, and on the constitutionality of a debtor to consent in writing to the jurisdiction of a magistrates’ court other than that in which that debtor resides or is employed.
Van der Walt commended the department for urging creditors and their attorneys to consider the judgment.
Spokesperson Mthunzi Mhaga said the department was finalising amendments to the Magistrate’s Court Act in an attempt to curb abuse in the recovery of debt.
This bill would be available on the department’s website for further consultation before it was submitted to Parliament for consideration and enactment, Mhaga said.
“This comes after the University of Stellenbosch Legal Aid Clinic, on behalf of several debtors, brought a court application to have certain provisions of the Magistrate’s Courts Act declared unconstitutional and invalid because they do not provide for judicial oversight over the authorisation and issuing of EAOs,” Mhaga said.
“The court was also asked to give clarity on whether section 45 of the act permits a debtor to consent to the jurisdiction of a court other than that in which the debtor resides or employed in respect of the enforcement of a credit agreement to which the National Credit Act applies.”

http://www.iol.co.za/news/crime-courts/creditors-warned-about-attachment-orders-1.1889217#.VbAMwuIrJhE