Atlas Fin scams South Africans in garnishee order racket

Atlas Finance, which bills itself as SA‘s “largest independent microlender”, is central to a scam that has ripped off hundreds of poor South Africans.

A Business Times investigation has found that Atlas, which has granted more than two million loans over its 20-year history, has taken money via fraudulent garnishees submitted to the employers of its customers, in order to collect what it says it is owed.

Court documents supporting more than 400 of these shady garnishee orders cannot be found at the Krugersdorp and Randburg magistrates‘ courts where they were purportedly granted.

Garnishees may be granted only after judgment and after being assigned case numbers and files.

With documents missing, court officials have declared that the orders “appear to be fraudulent” as the cases “do not exist” on their systems.

Atlas has furiously denied that it has been involved in the fraud and claims it has been exonerated by the courts.

However, Senior Krugersdorp magistrate J Visagie says in a letter only that the “alleged fraud does not appear to have been perpetrated by court officials”.

In a sworn statement, the taxing master of the Randburg court, Yakad Allay, said that more than 200 Atlas garnishee orders were “fraudulent”. No case numbers assigned to the Atlas garnishee orders “are genuine”, he said. “I do not recognise any initials of the clerk” who ostensibly signed the order, he said.

This is just one of the many clouds that hang over Atlas Finance, a company which has hit its clients with such extreme costs that, in some cases, they end up paying an annualised rate of more than 400% interest on their loans.

These costs have, in some cases, meant that illegally obtained garnishee orders have been used to force consumers to repay more than three times what Atlas says it lent.

In one of the most egregious cases seen by Business Times, an Atlas customer who borrowed R8,000, was asked to repay more than R31,000 to clear her debt.

This client, who earned less than R8,000 a month, was told in April 2011 to repay R4,030 a month via a fraduelnt garnishee order.

More than R20,609 was deducted from her salary during 2012, before the Krugersdorp Magistrate‘s Court issued a letter declaring the garnishee order to be “fraudulent”.

Despite these repayments, a statement issued by Atlas last year claimed that she still owed R11,870.

These practices have helped Atlas, owned and run by Johannesburg businessman Jack Halfon, to clock up more than R1-billion in revenue through loans given at its 170 branches.

Dave Woollam, former financial director at African Bank and a director of financial advice company Summit Financial Partners, has denounced Atlas as “another example of a micro lender that is acting with impunity with regard to both the spirit and the letter of the law, and bringing disrepute to an industry that plays an important role in our economy”.

In all, files associated with 400 Atlas garnishees are missing. Atlas has also failed to produce copies of the judgments that should have been issued by the courts alongside the garnishee orders.

Summit Financial Partners said that it had uncovered about 170 missing Atlas files at the Krugersdorp Magistrate‘s Court.

Charles Gilbert, a controversial consumer activist, has raised questions over another 230 Atlas garnishee orders — supposedly issued by the Randburg Magistrate‘s Court, which also cannot be found.

Gilbert and Summit have both now accused Atlas‘ debt collections arm, Syndicated Debt Collectors, of fabricating court documents.

“They are generating these garnishees at their offices at an industrial scale … they just pull numbers out of the hat and that is the number they put on the case,” claims Gilbert.

 Halfon has not denied that the garnishee orders are fraudulent, he maintains that his company is not the source of wrongdoing.

Atlas has in response accused Gilbert of trying to “extort” R2-million from it, and has similarly tried to bring criminal charges against Summit — which was dismissed by prosecutors.

In an interview, Halfon argued that Atlas would not benefit by forging garnishee orders, which it could easily obtain anyway.

Instead, Halfon said he was close to identifying the culprit for the Krugersdorp frauds — linked to a third party known only as “Clifford”, who has apparently forged other garnishee orders linked to another debt collected called Draft Services.

Halfon said that Atlas used “Clifford” as a courier to deliver the application for garnishee orders to a Krugersdorp court official — but instead of obtaining legitimate judgments, Clifford and/or this court official then constructed fraudulent garnishee orders.

The revelations that Atlas benefited from fraudulent garnishee orders raise fresh questions about a system that has been panned as unfair to consumers.

 Halfon admits that Atlas would have been “negligent” by not ensuring it had copies of the judgments before delivering the garnishee orders.

Atlas does not use a courier service to deliver documents to the magistrates court in Randburg and has no explanation for the 230 missing files.

Halfon claims that the court is  investigating the matter and that Atlas is not to blame.

Exorbitant charges for  insurance

Not only is Atlas Finance at the centre of a row over forged garnishee orders, it is also struggling to defend itself from claims it has broken the National Credit Act by levying extortionate fees.

The act says lenders may charge only a “reasonable” amount for credit life insurance, to cover the company if a consumer dies before repaying debt.

But Atlas is charging more than 14-times the maximum fee for credit life insurance proposed by the National Credit Regulator, alongside the 60% interest on the loan itself. This is far higher than competitors.

Atlas is now charging an effective R112 in “credit life insurance” for every R1000 borrowed by a consumer for its one-month loans — far higher than the R4 per R1000 proposed by the regulator, and an industry average of below R7/R1000.

Business Times has calculated that, thanks to these sorts of hidden charges, people who borrow money from Atlas are paying an effective annualised rate of 182% on its six-month loans, and as high as 400% on its one-month loans.

Atlas, whose own calculations put this figure at marginally lower, claims that it is line with the law, and that it offers a premium insurance product with additional benefits to clients.

But Dave Woollam, former African Bank chief financial officer and now a director of Summit, disputes this.

“Based on evidence that I have been shown, it would appear that, in addition to the ongoing allegations of wrongdoing and illegality with regard to obtaining [garnishee orders], Atlas is also breaching at least another a significant issue raised in the joint statement by National Treasury and the Department of Trade and Industry ... [by] charging excessive credit life premiums.”