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CityPress - - Business -

ast week, a land­mark rul­ing raised ques­tions about the le­gal­ity of many emol­u­ment at­tach­ment or­ders (EAOs).

Com­monly known as gar­nishee or­ders, these court or­ders al­low credit providers to deduct out­stand­ing pay­ments di­rectly from an in­di­vid­ual’s salary.

A key rul­ing was that the judge deemed the EAOs in the case be­fore him un­con­sti­tu­tional be­cause they had not been granted by a mag­is­trate and only re­quired the con­sent of the in­di­vid­ual. This rul­ing is still sched­uled to go be­fore the Con­sti­tu­tional Court and may be con­tested.

More­over, even if changes are made in terms of the Mag­is­trates’ Courts Act to re­quire EAOs to be granted by a mag­is­trate, the le­gal opin­ions are that it is un­likely that these will be ap­plied ret­ro­spec­tively – but we will have to await the Con­sti­tu­tional Court rul­ing on the is­sue in due course.

More im­por­tantly, the court up­held the Na­tional Credit Act’s re­quire­ment that an EAO can only be granted by a court close to where the con­sumer works or lives. Many EAOs were is­sued in other prov­inces, pre­vent­ing the con­sumer from en­act­ing his or her right to go to court to con­test the EAO it­self or the amount be­ing de­ducted.

Deputy credit om­bud Reana Steyn says that, over the past six years, the sec­ond-high­est num­ber of com­plaints the of­fice has dealt with has been about EAOs.

“In our ex­pe­ri­ence, con­sumers who logged com­plaints with our of­fice had sim­i­lar prob­lems to those raised in the court case. In the past, the con­flict­ing le­gal in­ter­pre­ta­tions of the leg­is­la­tion some­times made it dif­fi­cult to as­sist con­sumers.

“Now, some of the in­ter­pre­ta­tion is­sues have been set­tled,” says Steyn, who adds that, apart from ju­ris­dic­tion is­sues, the om­bud has ad­di­tional con­cerns about prac­tices of over­charg­ing on in­ter­est and fees, as well as reck­less lend­ing, which were also raised by the court as a ma­jor con­cern.

“We wish to alert con­sumers that they may ques­tion the va­lid­ity of a loan or other credit agree­ment af­ter it was granted if they sus­pect that it may have been a reck­less credit agree­ment.

“If a con­sumer can­not af­ford the loan/credit agree­ment and the agree­ment ren­ders them un­able to pay their monthly ex­penses and other credit agree­ments, such an agree­ment may be reck­less. Our of­fice can help con­sumers to in­ves­ti­gate whether or not it was reck­less and ad­vise on the way for­ward,” says Steyn.

The court rul­ing has led to a plethora of lawyers of­fer­ing ser­vices to in­ves­ti­gate EAOs, but con­sumers can use the ser­vices of the credit om­bud for free.

Once you have con­tacted the om­bud’s of­fice, it will ex­am­ine the credit agree­ment from in­cep­tion to un­der­stand whether the agree­ment and sub­se­quent le­gal ac­tion were valid:

They will an­a­lyse the af­ford­abil­ity as­sess­ment con­ducted by the credit provider to see if the loan was reck­less. If the con­sumer was truth­ful about his or her ex­penses and the loan was un­af­ford­able, it could be deemed reck­less and writ­ten off.

If the loan was valid, the om­bud will then look at the in­ter­est rate and fees charged to en­sure they are in line with the Na­tional Credit Act.

The credit provider will be asked to pro­vide a full state­ment show­ing cap­i­tal, in­ter­est and re­pay­ment cal­cu­la­tions to en­sure the con­sumer has not over­paid.

The om­bud will also look into whether the EAO was is­sued out­side of the con­sumer’s ju­ris­dic­tion, and if so, it could lead to the EAO be­ing re­scinded.

“Be­fore an at­tach­ment or­der can be granted, a judg­ment would have been is­sued that is valid for 30 years. Even if one re­scinded the EAO due to court ju­ris­dic­tion, the credit provider can sim­ply is­sue a new one or ex­e­cute the judg­ment through other means,” says Steyn, who adds that it does, how­ever, of­fer some lever­age for ne­go­ti­a­tion.

The om­bud’s of­fice it­self can­not go to the courts to re­scind the EAO, but is able to ne­go­ti­ate with lawyers on a con­sumer’s be­half.

If there is a small amount out­stand­ing, the con­sumer could re­quest that the bal­ance be writ­ten off or fur­ther re­duced rather than re­quest­ing the at­tor­neys go to the trou­ble of re­scind­ing and reis­su­ing a new or­der.

Steyn says they will, as a mat­ter of course, in­ves­ti­gate whether in­ter­est or fee cal­cu­la­tions have been made in er­ror. If they have, the of­fice will ne­go­ti­ate to have the amount cred­ited to the con­sumer’s ac­count or re­paid.

“Con­sumers who owe the debts should not as­sume that they no longer have to re­pay, even if the EAO was is­sued out of the wrong court.

“But there is now a good rea­son to in­ves­ti­gate the va­lid­ity of each of these or­ders, and it may bring re­lief to many con­sumers,” says Steyn.

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