The local division of international mining company Anglo American Platinum (Amplats), together with seven of its employees have launched legal proceedings against law firm HVDM Attorneys, its administration business (HVDM Administrators), as well as the Minister of Justice, the Minister of Trade and Industry, and the National Credit Regulator, for what Amplats believes is "unlawful" overcharging of debt administration.
Amplats and its employees are accusing HVDM and its admin business of "unlawfully deducting fees and remuneration in excess of the 12,5% cap imposed by s 74L(2) of the Magistrates' Court Act 32 of 1944".
Industry reaction
CEO of debt counselling firm DebtBusters Ian Wason welcomed the move: "Amplats should be applauded for these actions to protect their employees, it is just a shame that it has taken so long for a responsible employer to stand up against this. I think most employers will watch from the sidelines and see how this plays out, but if successful it could lead to a slew of similar actions."
In the affidavit Amplats and its employees argued that the fee that attorneys charge when carrying out administration work should be capped at 12,5%, the same rate which applies to administrators.
The abuse of emoluments attachment orders (also known as garnishee orders), which require employers to deduct amounts owing to creditors from employees' salaries was also raised. In many cases, EAOs leave workers in bad financial standing for longer, as they do not receive their full income.
Industry abuse?
Besides accusing the firm and its administrators for charging too much, Amplats and its employees allege that EAOs were granted in favour of the administrators, not taking into consideration the (negative) impact that this could have on the employees.
The affidavit further stated: "In these proceedings, the applicants seek to clarify certain aspects of the regime governing administration orders granted under ss 74 to 74W of the MCA. The regime is being abused by the first to third respondents who, at best, take advantage of uncertainties as to the proper interpretation of these statutory provisions."
Wason said this case is another blow to the debt collection and garnishee order industry, which has had bad press over the past year. This, in turn, has led magistrate courts to act more carefully and within tighter guidelines when granting garnishee orders.
According to Wason, although the fees that law firms charge when acting as administrators are regulated, this additional cost can be excessive and add significantly to the consumer's financial burdens.
To better combat the issue of administrator fees and how much the consumers are charged, Wason said: "Ideally these fees should be reduced and better regulated. There is obviously a moral hazard if consumers feel they can get away with not paying their debts, but I do not think that garnishee orders should be used for such things. Garnishee orders should be used for maintenance payments and similar instances."
HVDM's response
Justmoney contacted CEO of HVDM Attorneys Hannatjie Pienaar for comment on the allegations made against HVDM Attorneys and the HVDM Administrators. Pienaar said: "The matter should be left in the hands of the court, but I believe that the allegations are unfounded."