A task team headed by Credit Ombud Manie van Schalkwyk has been established to investigate current practices and establish a code of conduct to address concerns that Emolument Attachment Orders, loosely referred to as garnishee orders, are worsening the over-indebtedness of South African consumers. 
The commonly used system of deducting loan repayments from employees’ salaries through garnishee orders, is seen as a contributing factor in the over-indebtedness of millions of South Africans.
Emolument attachment orders are court orders which compel employers to deduct amounts from their employees until their debt obligations are cleared. They are a widely used method of recovering bad debt with an estimated three million orders believed to be currently affected against employees’ salaries in South Africa.
“Garnishee orders are a favoured method for credit providers to get their money back because the process is time and cost-effective and easy to implement, but there appears to be widespread abuse of the system,” says Van Schalkwyk.
“The current practice is unsustainable and its continuation will have a significant socio-economic impact on our country.”
The task team will comprise representatives from a range of bodies including the Association of Debt Recovery Agents; Credit Bureau Association; Council for Debt Collectors; Credit Providers Association; Garnishee Administrators; Large Non-Bank Lender Association; Law Society; Micro Finance South Africa and the SA National Consumer Union.
Van Schalkwyk says independent research by the University of Pretoria has so far highlighted a number of areas of weakness in the system including issues of misrepresentation by collecting attorneys, forgery of signatures, unreasonable instalments and high and unnecessary costs.
These issues coupled with broader problems such as a lack of basic financial and legal literacy skills amongst consumers; insufficient communication between credit providers and employers; and a lack of knowledge amongst clerks of the court, as well as amongst employers are just some the reasons that the current practice is not sustainable.
There is also an absence of appropriate administration systems and judicial oversight and control.
Van Schalkwyk explains that in some cases the behaviour of collection attorneys is simply immoral, with unnecessary and exorbitant fees being levied against consumers.
“In one case, a consumer had a debt of R6 000, but four months later, the debt was standing at R11 000,” says Van Schalkwyk.
“It could be legal, but it’s not moral.” and there are many examples like this. These are not just isolated cases from unregistered debt collecting attorneys,” says Van Schalkwyk.
“They serve as an important barometer of the state of over-indebtedness of consumers, especially those in the lower income brackets.”
By April 2011, one out of every seven public servants in KwaZulu-Natal’s provincial departments had a garnishee order against their salary, while in September 2012 financial advisory firm, Summit Financial Services estimated that 10-15% of the total workforce of South Africa had some type of garnishee order in place.
The average number of garnishee orders per employee is about two, although in some cases can be as high as 12.
The task team will investigate and research the garnishee system in South Africa and establish a code of conduct to regulate the conduct in terms of Emolument Attachment Orders in the short term and also look at possible legislative reforms to address the issues in the long term. The task team will also address the abuse of the current garnishee orders which are in existence.
“The problem of garnishees is not specific to employees in any specific industry,” says Van Schalkwyk.
“The cost to the consumer and the current abusive conduct of some firms, represent a real moral concern because they contribute to the problem of over-indebtedness and must be further investigated.”
Van Schalkwyk says the task team will look at how credit providers can work together with regulators to ensure that a sustainable collections process is put in place.
“There needs to be far more focus on rehabilitating consumers as well as legislative reform, to ensure future growth of the credit industry,” he says.