The government plans to introduce a cap on the percentage of your salary that can be "attached" by creditors using emolument attachment orders to collect debt.
The Courts of Law Amendment Bill proposes that no more than 25% of a debtor's salary can be attached, no matter how many attachment orders they may have against them.
The bill, which seeks to address abuses in the civil debt recovery system, was introduced in the National Assembly this month and has been referred to the National Council of Provinces. Thereafter it will be sent to the president for approval.
The bill gives effect to a Constitutional Court judgment in favour of the Stellenbosch University Legal Aid Clinic and others. That case stemmed from action taken by the owner of DeMorgenzon wine estate, Wendy Appelbaum, after discovering that up to 80% of her employees' salaries was being deducted to pay debts to credit providers.
Class action
Appelbaum initiated a class action suit that was heard in the High Court in Cape Town by Judge Siraj Desai. The main respondent in the case was Flemix & Associates, a firm of attorneys that collects debt - mostly via attachment orders - on behalf of 45 credit providers. The firm told the court that it had about 150,000 active cases with a total value of about R1.6-billion.
When the bill was introduced, the DA saidthe case was about more than changing the law; it was about the role of the National Credit Regulator in protecting poor and indebted South Africans against exploitation.
The DA quoted from Desai's judgment: "It is safe to assume that thousands, if not tens of thousands ... [of] ordinary working people in debt are having significant portions of their salaries or wages deducted based on unlawfully obtained [attachment orders] ... The [NCR] ... must endeavour to ensure that appropriate measures are in place to monitor the situation."
The DA said the credit regulator had, however, done "nothing about the 150,000 apparently vulnerable people".
But the NCR's company secretary, Lesiba Mashapa, challenged this interpretation of the Constitutional Court judgment. The court did not confirm the Stellenbosch judgment but merely required the changing of some wording in the Magistrates' Courts Act to make it constitutional, he said.
"The judgment is also not retrospective," he said.
However, the bill provides for retrospectivity, specifically "to assist debtors who find themselves having to pay up in terms of court orders which have been irregularly obtained as a result of current abuses that the bill seeks to address".
The memorandum on the bill says some of the clauses will apply with effect from July 8 2015, the date of the high court judgment in the Stellenbosch case.
The regulator had carried out 19 investigations against credit providers relating to attachment orders, Mashapa said. "Seven were referred to the National Consumer Tribunal, while enforcement action is being finalised in the remaining investigations. Two credit providers applied to the high court challenging the referrals."
What's an EAO?
Up until a landmark ruling in the High Court in Cape Town almost two years ago, these orders were commonly used for the collection of unsecured bad debt.
The ruling, issued by Judge Siraj Desai, found that the Magistrates' Courts Act, which governs the issuing of these orders, needed to be tightened up.
Abuses noted by Desai included the issuing of orders in courts far from where the debtor lives, thus denying the debtor the opportunity to challenge the order or the amount being deducted, and the issuing of the orders by clerks of the court instead of by magistrates themselves.
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