A small step towards curbing lending abuse

WHEN times are tough, the temptation to take out a small loan to relieve the financial pressure may be difficult to resist, especially if one is unaware of the hidden costs of the loan, not to mention the ruinous interest rates that are charged. Indeed, the ugly spectre of the loan-shark industry loomed in the background when police shot striking miners at Marikana in August 2012.

So the case brought by the University of Stellenbosch’s Legal Aid Clinic against debt collectors on behalf of 15 workers could have beneficial effects beyond the Cape Winelands.

In this case, Judge Siraj Desai ruled the debt collectors had not obtained the necessary consent from the workers to garnish their salaries. There were also questions over the authenticity of the signatures. The magistrates who had granted the garnishee orders against the workers were often far removed, geographically, and therefore had no authority to give their assent.

He further ruled that the Magistrates’ Court Act was being abused, in that the courts — in some cases clerks rather than magistrates — took little or no account of the financial status of the workers. His ruling has been praised by the South African Human Rights Commission, although the firm concerned has said it would appeal.

On our news pages today we carry the stories of those whose fingers have been burnt by the debt sharks. These are heartbreaking accounts of how poor and largely uneducated people have fallen victim to these nefarious practices.

It is near-impossible to craft the law in such a way as to prevent people from painting themselves into a financial corner with easy money, and there will always be someone willing to advance a loan on harsh terms. That said, all attempts must be made to keep micro-lending within the law, and common decency.

It is ironic that this matter should have come to court largely as a result of the efforts, not of the trade unions that have railed against the practice of mashonisa, but by businesswoman Wendy Appelbaum, whose workers on her wine farm were affected, and whose conduct suggests the rich can also care.

While Cosatu has made noises against lending abuses, the obvious step of taking the matter to court had been overlooked and, in the factional fighting paralysing our unions, neglected.

The victory for the loan-shark victims has to be applauded, and one can only hope that the judge’s ruling becomes part of a new norm for the industry and its hapless victims.