Garnishee robbery

More than half a million South Africans are not taking home their full salaries at the end of the month.

A report released by the Pretoria Law Clinic on Friday shows that about 435084 workers in the private sector have emolument attachment orders against them, and 189036 (about one in eight) of the 1.55million government employees are in the same boat.

Though there is no indication of the number of attachments obtained fraudulently, the Reserve Bank believes it is a "major problem".

The Treasury is working on amending the Magistrates' Act to clear up uncertainties in the imposition of attachments.

Attachments, sometimes wrongly referred to as "garnishee orders", are used to bring in money by forcing employers to deduct debt installments from salaries before paying employees.

The system has come under closer scrutiny because the government and some economists fear that consumers are over-indebted.

The latest statistics from the National Credit Regulator show that more than 9.5million South Africans have impaired credit records, despite interest rates being at their lowest in four decades.

Almost 13% of miners have "garnishee" orders against them. Their widespread abuse has shrunk the disposable income of miners and is thought to be contributing to the labour unrest in the mining sector.

Charlotte van Sittert, of the Law Clinic, said some of the shortcomings of the system included:

• Lack of uniformity in the granting of orders by courts;
• No statutory provision for affordability tests;
• Irregular deductions affecting the repayment period and high collection fees;
• Charging of excessive fees, incorrect charging of interest on outstanding balances and the levying of non-admissible charges;
• Reckless granting of credit and multiple deductions from salaries;
• Companies' payroll offices either stop the orders too soon or too late and in some cases never; and
• Debt collectors set the installments too low so that debtors pay installments with no prospect of settlement and are caught in a debt trap with little likelihood of rehabilitation.

Attachment orders need only to be signed by a clerk of the court, which often leads to corruption.

"Currently officials at two magistrate's courts are under investigation for issuing fraudulent orders," said Van Sittert.

"[We found] an attorney who was charging an attendance fee for making copies, as well as duplicated fees," she said.

"We have found one debtor who had 30 deductions from his salary. He received three pay slips to make provision for all these deductions. This is definitely an indication of reckless credit granting."

The manufacturing sector has the second-highest number of employees on whom attachments have been imposed - 9.2% of the sector's workers, with an average of 1.4 orders each, and the services sector (financial, insurance, estate agencies and other business) with 2.28% of workers, with 1.76 orders each.

In central government departments, 72118 employees had attachments, with an average of 1.6 orders each, and 116918 public service workers at provincial level had orders against them.

Kuben Naidoo, an adviser to Reserve Bank governor Gill Marcus, said last week that since 2002 "hundreds of thousands of public servants had garnishee orders against them".

"We had a situation in the police in which tens of thousands of policemen and women were taking home less than R750 a month after all the deductions for micro loans, insurance and garnishee orders."

Ingrid Goodspeed, director of financial sector development at the Treasury, said the government was working on amending the Magistrates' Act to clear up uncertainties in the imposition of attachment orders.

"The major one is [allowing] a clerk of the court to stamp and let through attachments. These things should be given to a magistrate, [who should] apply his mind to the situation and consider the portfolio of the borrower [to establish] whether he can afford them."

Arnoud van den Bout, a lawyer at Flemix Attorneys, which handles large volumes of attachments, said Goodspeed's proposal posed a problem.

"The courts already struggle with capacity and training," he said.

Goodspeed said that though a start had been made in compiling a code of conduct on the administration of attachments, the debt-collection industry and the government would have to work together to weed out bad practices.

"The National Credit Regulator has issued proposals in terms of the credit providers' code to combat over-indebtedness.

Its proposals are, in summary, that debt be limited, that cumulative emolument attachment orders cannot exceed 30% of current monthly gross income and that an attachment order have a maximum duration of five years.

"If your debt is not paid off in five years, you can use other mechanisms to recover it, but not attachment orders," she said.