t all started with one of her workers struggling to pay off a debt, Wendy Appelbaum explains from her favourite chair in her house on the De Morgenzon wine estate in Stellenbosch.
Appelbaum, who owns the wine estate, is a leading businesswoman and philanthropist. She fronted this week’s debt judgment, which experts say will have a ripple effect across the economy.
A major victory was scored when Western Cape High Court Judge Siraj Desai ruled that deductions from employees’ salaries for so-called garnishee orders were illegal.
The National Credit Act makes it compulsory for creditors to make an affordability assessment before giving credit to those who apply for it. The trouble started when one of Appelbaum’s employees bought something on credit, but a proper affordability assessment was not done beforehand.
“In the case of my employee, they filled in one on his behalf. They filled in that he paid no rent, no food, nothing to pay and only needed R50 a month to survive. Who lives on R50 a month? He has five children. They [microlenders] break all the rules because they get away with it as the industry is not regulated.”
Garnishee orders, as they are colloquially known, are emolument attachment orders that allow deductions to be made straight from the wages of employees who default on loans and other credit extended to them. Through his judgment, Desai has managed to strike down several common practices that can enslave workers.
Summit Garnishee Solutions, a company that audits payrolls for suspect garnishee orders, says 40% to 50% of these orders are issued in wrong jurisdictions, making them illegal.
This means of the estimated 1 million garnishee orders that have been granted, as many as 400 000 could be unlawful.
Appelbaum estimates that debt collectors steal about R5 billion from the poor by overcharging on interest, legal fees and tracing fees imposed on overindebted borrowers who default on loans.
She also doesn’t understand how so many garnishee orders can be obtained in courts that are far from where people borrow money. This, she said, opened the whole system up to abuse.
“They bribe the clerks of the courts in small towns. How can it be possible that in a tiny town, up to 300 to 350 garnishee orders are made a day out of jurisdiction without it being absolutely rotten to the core? There is such a gross abuse of the system.”
Appelbaum is scathing in her criticism of government, which she says has taken little action despite studies done by the University of Pretoria in 2008 and 2013, respectively, which recommended how to deal with the issue of unsecured lending and garnishee orders.
The study recommended that salary attachment orders be obtained in a court that has jurisdiction over the indebted employee’s business premises. It also found that in cases where it is suspected that an indebted employee will not take home enough money to live off after the money owed is deducted from their salary, they should be able to negotiate
ENOUGH IS ENOUGH
Wendy Appelbaum’s concerns have led to a court ruling on garnishee orders