The Constitutional Court is set to examine aspects of the law relating to emoluments attachment orders (EAOs) in March 2016 in order to determine whether or not the legislation is unconstitutional, as was found by Judge Desai in the Western Cape High Court earlier this year.
Odette Geldenhuys, senior associate in the pro bono practice at Webber Wentzel, has been actively involved in the case. She explained that an EAO is a method of debt collection. However, there are certain steps in the EAO procedure that debtors should be aware of, and in some instances these are not being applied properly.
While the case awaits the ruling of the Constitutional Court, certain employers in the Western Cape are exempt from deducting the EAO repayments from their employees’ salaries. This is in accordance with an order of the Western Cape High Court that was made on 1 October 2015.
Emoluments Attachment Orders (EAOs)
“[EAOs are] a method of debt collecting that is provided for in the Magistrates Court Act, and the debt is collected by deducting a portion of the debtor’s salary until the debt has been expunged,” noted Geldenhuys.
“The Magistrates Court Act provides for a procedure in terms of which the debtor should be advised that certain steps will be taken if they do not settle their debt. These steps involve a letter of demand and a notice. Should the debtor not respond, then the credit provider can approach a court to obtain a judgment for the outstanding debt, and thereafter an EAO to collect the debt,” explained Geldenhuys.
“However, what has happened in practice is that the legislative steps haven’t been properly followed by the debt collectors.
The issues at hand
Geldenhuys highlighted that the different steps are not always carried out as they should be.
“We have seen many examples where the credit provider would give to the debtor the letter of demand, the notice and a document to sign wherein they give their consent to the judgment and the emoluments attachment order, so instead of it being four steps it all happens in one step,” revealed Geldenhuys.
In addition to the above issue, Geldenhuys pointed out that debtors are often approached at inappropriate times, or times when they feel vulnerable, and therefore are not always aware of what they are signing or agreeing to.
“The debtor is often approached when they are at work or possibly late at night, usually at times when people feel either embarrassed in front of their colleagues to properly read the documentation or they feel vulnerable and under pressure to sign documents without having read it,” said Geldenhuys.
Furthermore, the matter of the location of the court where the EAO and judgment are issued will be considered by the Constitutional Court. Geldenhuys pointed out that many of the EAOs in the case were issued in the wrong court. In other words, it has not been issued at the court closest to where the debtor lives. This means that the debtors with the EAO against them have to travel to the court where the judgments were passed in order to dispute them.
Employer’s in the Western Cape are exempt from servicing EAOs that were issued outside of the debtor’s jurisdiction until the Constitutional Court has ruled whether or not this matter in the legislation is unconstitutional. However, if the court finds that it is not unconstitutional, the missed payments will have to be paid up.
The case
“What we hope to achieve is that this instrument [EAOs] must be used in a more responsible way and it must be used in terms of existing legislation. The first step that must be met is that there should be a reduction in reckless lending. Reckless lending is against the National Credit Act (NCA), and credit providers are required to adhere to all existing legislation.
“Secondly, as the law is being interpreted now, it is unfair for people who live in Cape Town to travel to Bloemfontein to go and explain to the court in Bloemfontein that you can’t afford a deduction of R200 a month but only a deduction of R100 a month,” highlighted Geldenhuys.
Furthermore, the Constitutional Court will make a ruling as to the constitutionality of a clerk of the court issuing judgments which are based upon a person’s salary, instead of a magistrate.
If a debtor believes that there has been a breach of legislation in the way that the EAO was obtained, there are legal steps that they can take. These breaches of legislation include if the EAO was obtained from the wrong court. Depending on the facts of the case, the EAO may be cancelled or amended.
If an EAO has been overturned, the credit provider can apply for another one against the debtor, as long as they follow the correct procedure.