Garnishee order ban 'not clever'

20 November 2013 - 02:34 By JAN BORNMAN
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A ban on emolument attachment orders, sometimes wrongly called "garnishee orders", would have a "severe impact" on the economy.

This is according to a report from Econometrix presented yesterday by economist Rob Jeffrey.

The Times reported last month that more than 500000 people were not taking home their full salaries as a result of emolument attachment orders.

"Borrowers must ultimately remain responsible for the debts they incur," Jeffrey said.

But, an outright ban of the "garnishee order" would not only cost the economy up to R3.2-billion and close to 24000 jobs, it would effectively reduce access to credit for low-income and rural credit consumers.

This means the less privileged would face higher costs and be at an increased disadvantage.

Jeffrey said a ban might result in a slowdown of investment in old and new companies.

Foreign and local investment might also be affected, as investors might view a ban on emolument attachment orders as "one further piece of government intervention".

Abolishing or limiting the orders could lead to making loans too cheap, creating high default rates. It might also lead to an increase in the illegal lending industry, he said.

Slow payers and non-payers were "a burden not only to the banking system but also to other citizens", as the good payers have to pay the additional costs of the debts associated with bad payers.

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