Garnishee orders: How to steal legally
“It’s the biggest theft in this country,” says Clarke Gardner, Summit Garnishee Solutions founder. But creditors continue to sting consumers over outstanding debts, leading to overcharging amounting up to R3-billion a year. By GREG NICOLSON.
If you’ve ever noticed deductions from a garnishee order come off your pay cheque, you’ll know how much of a headache the system can be. To collect your outstanding debt a creditor can go to court for an emolument attachment order, which forces your employer to deduct part of your salary and pay it to the creditor. Lumped into your debt are interest and administration costs.
You should have signed an acknowledgement of the debt in question, but occasionally the first you’ll hear of the deductions will be after they’ve started, your signature having been forged by a credit agency or because you didn’t understand what you were signing.
If you’re not vigilant or don’t have the resources to go to court, it’s likely you’ll be paying exorbitant and illegal amounts of interest, meaning you’ll be paying off much more than your original debt.
“It’s an open season. It’s the biggest theft in this country,” says Clark Gardner, founder of Summit Garnishee Solutions, which audits employers’ books for illegal practices and can handle their employees’ deductions.
“If you owe me money and you don’t pay, I can approach the court to get a deduction from your salary and your employer must pay me the deduction with very little laws governing when do I start deducting, when do I stop deducting and how much I charge you.”
About three million South Africans are tied to garnishee orders and a study by the University of Pretoria’s Law Clinic found irregularities are rife. It found debtors hadn’t consented to the deductions, creditors ignored the jurisdiction and charged up to 25% on top of the capital amounts, plus another fee for collection costs. Sometimes the emoluments were adjusted after the court order was obtained and there were cases where more than one judgment was issued for the same debt. The clinic found 75% of employers feel its garnishee deductions are unreasonable.
“We call it the ‘Dooh Nibor effect’, Robin Hood in reverse, because it’s the rich stealing from the poor via a court order,” says Gardner. A “capitalist at heart” who was raised with a strong sense of social justice, when Gardner finished studying at Stellenbosch University he noticed the 60-odd employees at his father’s carpentry firm were stuck in a cycle of borrowing from loan sharks charging excessive fees.
He set up a micro-finance business with his brother that they eventually sold to Summit. But he realised he was trying to be both player and referee, helping workers reduce their debt while lending them money.
So he decided to focus specifically on addressing garnishee irregularities and teaching consumers to manage their finances. Summit offers a service called 6cents, which is available online or through the post. The service takes your bank statement and turns it into a cash flow statement. Like the recently launched 22seven, it offers financial advice without trying to sell extra services.
“There are three million garnishee orders in circulation and on average we save R1,000 per order. That means R3-billion is being stolen by lenders and collectors from employees through garnishee-order deductions,” says Gardner.
If you’ve been stung by the process, you might have spoken out on a blog or been in contact with organisations like Summit or FairDebt, but the average worker earning R4,000 a month doesn’t have the resources to dispute an order in court.
“We’ve seen R20,000 blown to R160,000 just because the collector can deduct whatever they want and he is protected by the law. It’s an incredibly weak structured system,” says Gardner.
The National Credit Act tries to provide regulations on collecting debts, but Gardner says it becomes irrelevant because it’s not being enforced by magistrates (the act was written in isolation of the Magistrates Court Act) and too many grey areas remain in the legislation.
“It must be black and white. If you transgress this rule or breach this regulation, this is what happens to you. They rather say, ‘It can happen like this and the court has the option of doing this, this and this.’ But we forget that the man in the street can’t go to court and exercise that option,” says Gardner.
His motives for fighting crooked creditors are simple. He hates the injustice and wants to keep South Africa’s consumers economically active instead of shackled to creditors.
If you or your workers have noticed deductions coming off your pay cheque for a little too long, and a little too much, your motivations for pushing for a rehash of the legislation are probably simpler. You’re tired of seeing money go to crooked lawyers and corrupt creditors. DM
Photo: “The biggest theft in this country” – Clarke Gardner, Summit Garnishee Solutions founder. DAILY MAVERICK/Greg Nicolson.