The story of James Ntseane, a platinum miner who took out two loans amounting to a combined sum of R18 000 four years ago, clearly illustrates the plight of many of those workers. According to the lender, African Bank Investments, which is reportedly the biggest provider of unsecured loans in South Africa, Ntseane now owes R30 515. Under a court-ordered payment plan, Ntseane’s employer docks about 13% of his monthly R12 600 salary to pay back the lender.
But it is not just mine workers who are finding themselves on this slippery slope. The country’s unsecured loans have reportedly jumped by a whopping 39% in a year. Statistics reveal that nine million South Africans are currently in debt and that an estimated three million (or 10 to 15%) of all employed South Africans currently have one or more garnishee orders against them. Garnishee orders, oftentimes also referred to as emolument attachment orders (EAOs), are court orders that are served by the sheriff (or messenger) of the court to the debtor’s employer. It orders the employer to make deductions from an employee’s wage or salary in order to settle a debt the employee owes a third party creditor or lender. A specified amount of money is deducted from the employee’s salary or wage every payday until the loan has been repaid in full.
Last year, garnishee orders made headlines in South Africa, not just due to the miner strikes, but also because many irregularities in the system came to light. “Part of the problem is that unscrupulous lenders have been using several loopholes in the law to, amongst other things, hopelessly overcharge employees by setting unreasonably high interest rates,” explains David Brown, Managing Director of Profile Software. “And the deduction from the garnishee’s wage is oftentimes so high, that the person is left with barely enough take-home pay to survive on. Some of the orders seem to be never-ending, because the outstanding balance is unknown, so there are no stop orders.”
Garnishees cause a major headache for employers, especially for the often already overworked human resource (HR) and payroll departments whose job it is to make the garnishee payments. Under the current EOL system, most employees don’t even realise that they have garnishees against them until they notice the deduction on their payslip. The problem is further exacerbated by the fact that the employer is served with the garnishee order without all the relevant detail. However, Brown thinks that, after all the conflicts and the suffering that has come to light during last year, 2013 should be the year for companies to sort out these garnishee related issues.
“In November last year, after the number of people with bad credit reached record highs, South Africa’s National Treasury and the Banking Association of South Africa agreed to review lending affordability rules and reduce wage garnishing,” Brown says. “The Credit Ombudsman’s office, which deals with credit-related complaints and provides debt counselling, has advised employees to assist their employees with garnishees.”
There are numerous ways that companies can do this. One multinational organisation resolved many of the issues by implementing a specialist garnishee management system by which each garnishee order was verified individually.
Brown says employers should train the necessary departments to determine the authentication of a garnishee order. “A real garnishee order is served by a messenger of the court and it should contain a case number, a stamp from the clerk of the court, it must be signed by an attorney, and it should have the full name and identity number or staff number of the employee.”
He says before the employer accepts the garnishee order, they must check whether the employee is still working at the company. If not, or if the garnishee order is defective in any way, the employee shouldn’t accept service of the order. If the employee is still at the company, he or she must be informed of the order. Employers should also educate employees about their rights. They can dispute the amount claimed if it appears to be incorrect, and they may also apply to the court to reduce the amount of the order if they feel the deduction is too big to leave them with enough money to survive on.
“Above all, education is key,” says Brown. “Teach your employees that unsecure loans that are so easy to come by can cost them dearly in the end.”
