Landmark garnishee ruling: What it means for credit providers, consumers

In what has been hailed as a victory for the poor and the marginalised, the law that has enabled credit providers to access wages and salaries for money owed to them through garnishee orders has been changed. While the law hasn’t been scrapped, it has got a lot harder for lenders and credit providers to gain easy access to the income streams of their clients. The Constitutional Court has ruled that clerks can no longer make the big decision to attach a salary. That is now a matter for magistrates, who will have to examine whether a garnishee order is an appropriate measure in the circumstances as well as how much should be deducted each month. The decision is not retrospective, so it won’t affect current repayments to businesses. But it will mean that companies like stores and banks will have to re-examine how they assess risk when granting credit. The South African Human Rights Commission and other groups have been lobbying for some time for a change to garnishees, as they have been abused in particular by microlenders charging staggeringly high interest rates on small loans to desperate people (Scroll down for the full judgment, plus analysis and comments from businesses affected by the change). – Jackie Cameron

By Lameez Omarjee and Carin Smith

Johannesburg – The Constitutional Court’s judgment to change the management of emoluments attachment orders, also known as garnishee orders, is regarded as a “100% win” for indebted people in South Africa, according to Odette Geldenhuys, a senior associate at Webber Wentzel.

Geldenhuys is the pro bono attorney for the applicants who initially brought the case in the Western Cape High Court last year. She told Fin24 she is pleased with the outcome of the case on Tuesday.


“The big change which we thought would be fair, is that decisions of whether a salary should be attached by an EAO (garnishee order) now cannot be made by a clerk of the court any more. The court now has put that decision to the magistrate, and it also gives the magistrate two tests to look at: firstly, whether it would be just and equitable to grant the EAO and secondly, what the debtor will be able to afford,” she said.

An EAO or garnishee order is a court order that compels a debtor’s employer to pay his or her debt from their salary.

What the ruling means for lenders

For lenders, the situation is no different if they intend to use a garnishee order to ensure they get their money back. However, the matter has been removed from the hands of the clerk to the magistrate, who now has directions on how and what to consider before issuing a garnishee order.

The Constitutional Court backed seven of the eight rulings made by High Court Judge Siraj Desai of the Western Cape High Court earlier this year. The only difference the Constitutional Court introduced was with section 65J(2) of the Magistrates’ Court Act, which was inconsistent with the constitution.

Judge Desai called for the legislation to be scrapped as it did not make provision for judicial oversight to be extended for granting a garnishee order to debtors. However, Geldenhuys explained that this would require the rewriting of legislation, which would be a time-consuming process.

The Constitutional Court introduced words to the existing legislation to make it constitutional. It makes provision in the legislation for “poor people” to have access to justice. This change will be applicable from the moment judgment is handed down, she added. There is not going to be a period of referring the problematic sections of legislation to Parliament to have new law drafted.

The ruling is not retrospective. “Retrospectivity would be unfair to credit providers,” she said. Credit providers at the time garnishee orders were issued were operating according to the law of the day, she explained. However, the judgment made by the court has clarified issues on its constitutionality.

What the ruling means for debtors

“We believe, when it comes to the attachment of someone’s salary, an extra step is not a bad idea, because of the havoc over-indebtedness causes in society. We expect the magistrate’s court will now draw up guidelines and requirements,” she said.

Geldenhuys emphasised that the judgment is not saying to debtors they do not have to pay. Rather, it is about what is fair and equitable regarding the attachment of someone’s salary to make sure they pay their debt, while the rest of their life can still go on.

“And linking back to reckless lending, credit providers will hopefully not make reckless lending as easily as up to now,” said Geldenhuys. She said she would keep an eye on the implementation of the new process.

She also pointed out that important orders made in the high court now have to be implemented. The judgment highlights that organisations like the SA Human Rights Commission, the National Credit Regulator and even the state have to do all within their power to educate consumers about their rights in terms of this Constitutional Court judgment.

“So, now civil society can go to those entities and ask what they are doing about it,” said Geldenhuys.

The high court also ordered the Stellenbosch University Law Clinic to provide a copy of the judgment to law societies so they can investigate the conduct of those in the legal fraternity who assisted credit providers in the garnishee order case.

“The court confirmed that credit providers cannot go to far away courts to obtain EAOs (garnishee orders). They must go to the court closest to the debtors,” said Geldenhuys.


From Capitec:

We are studying the court verdict. The section referring to jurisdiction and validity will not affect Capitec Bank in any way as we gave instruction to our agents in March 2012 to adhere to the consent and jurisdiction rules. In 2013 we started taking action against agents who were not adhering to this instruction.

We’re uncertain what the R800 000 comment refers to; we can only assume it is the money we’re currently paying back to government employees who have settled their loans, but whose government department pay-office failed to update the details. As a result, they continued to have money deducted from their salaries. As their loans are fully settled, their money is returned to their bank accounts. We cannot comment on why their employers haven’t updated their pay records.

Full Garnishee judgement

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