If you have an emolument attachment order (garnishee order), contact the Credit Ombud to find out whether or not it is legal.

Recently, 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 via their payroll.

A key ruling was that the judge deemed all EAOs to be unconstitutional as they had not been granted by a magistrate and only required the consent of the individual. This ruling is still to go before the Constitutional Court and may be contested; moreover, even if changes are made to the Magistrates’ Act to require EAOs to be granted by a magistrate, legal opinion is that it is unlikely that these will be applied retrospectively, but we will have to await the Constitutional Court ruling on this 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 their right to go to court in order to contest the EAO itself or the amount being deducted.

Reckless lending

Reana Steyn, Deputy Credit Ombud says that over the last six years, the second-biggest complaint the office has dealt with has been around 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 also found 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 it renders them unable to pay all their monthly expenses and other credit agreements, such an agreement may be reckless. Our office can assist 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 free of charge.

Once you have contacted the Credit Ombud’s office, they will look at the credit agreement from inception in order to understand whether or not the agreement and subsequent legal action was 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 their expenses and the loan was unaffordable, it could be deemed reckless and thus be written off.
• If the loan was valid, the Ombud would then look at the interest rate and fees charged to ensure that they are in line with the National Credit Act.
• The credit provider would be asked to provide a full statement of account showing capital, interest and repayment calculations to ensure that the consumer has not overpaid.
• The Ombud would also look into whether or not the EAO was issued outside of the consumer’s jurisdiction, and in appropriate matters it could lead to the EAO being rescinded.

“Before an emolument attachment order can be granted, a judgement would have been issued which is valid for 30 years. Even if the EAO is rescinded 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 itself cannot go to the courts to rescind the EAO but is able to negotiate with the lawyers on the 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 to go to the trouble of rescinding and re-issuing a new order. Steyn says that as a matter of course, they investigate whether or not interest or fee calculations have been made in error and if so, they will negotiate to have the relevant amounts credited to the consumer’s account or repaid.

Steyn concludes: “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.”

What you need to know about an emolument order

Before an emolument order can be issued, what process must take place?

In order for an EAO to be granted, there must be a judgment that was taken against the consumer. Thereafter an application is made to court for an order that the consumer’s salary be garnisheed with an amount to be paid monthly. Usually the credit provider will request a consumer to sign a Consent to Judgment and EAO. This Consent will then be made an order of court.

Can an EAO be issued without your knowledge?

No. If you consent to an EAO you will be required to sign a document that will advise that you are consenting to an EAO. Or if you do not sign consent, you may be called into court to do a financial enquiry. A judgment however, can be taken without a consumer’s knowledge, for example, a default judgment.

Does your employer have to notify you before taking it from your pay?

The employer will have to abide by the court order that they receive, instructing them to make the garnishee payment. So in some instances the employer may not notify you and oyu might only realise that the garnishee has been implemented when you receive your salary. It is obviously much more preferable for the employer to immediately call the consumer and discuss the matter and also to assist them should they dispute the matter.

How can you find out if the EAO is legitimate?

You can request a copy of the EAO court order from your employer. It will bear the name of the court, the case number, the credit provider that obtained the order against you, the attorney’s details, etc. This will provide you information that you can use to investigate the EAO.

How can you contest an EAO?

You can approach a court or contact the attorney and raise your concerns. In some instances attorneys do offer resolution by providing you with a statement of account or reducing the garnishee deduction.

Does an EAO have to take a survival salary into account? What if your EAO is leaving you with not enough money to survive?

An EAO should take your disposable salary into account, however this is not always practised. If you don’t have enough salary after garnishee deductions, you may contact the attorney and negotiate a lesser monthly payment. If this fails, you will have to approach the court where the EAO was granted, to request a reduction.