Many debt collectors are ignoring the National Credit Act (NCA) and judgments by the Supreme Court of Appeal and the Constitutional Court, because they use strong-arm tactics that effectively deny, in particular, low-income and financially unsophisticated debtors the right to justice, potentially sentencing them to a lifetime of debt servitude.
Recently, Cape Town businessman and lawyer Tinus Slabber successfully took on a firm of attorneys that represents one of the larger debt collection companies, Nimble Group, over a debt that one of his employees originally owed to Truworths.
As a result of Slabber’s intervention, Nelspruit-based Gerhard van der Merwe Attorneys had a debt judgment and an emoluments attachment order (EAO) that had been obtained against the debtor set aside and paid costs of R25 000.
Despite agreeing to have the debt judgment and the EAO rescinded, the law firm denies any wrongdoing.
Nimble buys, at a substantial discount, “problem” debt from credit providers, including banks and clothing and furniture retailers, and then uses tough measures to wring the money out of borrowers, adding substantial costs in the process.
The National Union of Mineworkers (NUM) and Old Mutual are significant shareholders in Nimble Group.
The debt that Nimble buys probably includes that owed by NUM members. Over-indebtedness was one of the issues that led to the violence at Marikana mine last year.
Slabber says what is happening is unacceptable and requires government invention.
Nimble – through its “PA to the directors”, Sunet Terblanche – denies any knowledge of Slabber’s accusations or intervention, saying it was informed of these by its attorneys only after Personal Finance had raised the matter.
Nimble says it has launched an investigation. However, although its investigation has yet to be completed, Nimble has already concluded that Slabber’s “allegations pertaining to Nimble are factually incorrect, misleading and defamatory. We will make further comment if appropriate once we have completed our investigation.”
Old Mutual says it does not support or condone any abuse of the legal system, and it believes that the law should be applied fairly and ethically in all circumstances.
Slabber says the procedures to oppose a summons are complicated, and most people do not realise that in a civil case they have to enter a notice of their intention to oppose the application.
“If you do not give such notice timeously and correctly, then default judgment will be obtained against you. It is all paperwork until a complicated exchange of papers, called ‘pleadings’, has been completed. This is unlike a criminal court, where the procedures are simpler and generally more familiar to the public, where you receive a summons set down for a particular date, when you can contest the matter.”
Slabber says defaulting debtors should not agree to legal proceedings taking place in a jurisdiction to which they cannot travel, because they will not be able to defend themselves against an unfair order.
Slabber’s views are supported by lawyer and credit expert Stephen Logan, who is the author of the book, The Credit Guide.
Logan says some debt collectors and attorneys have not woken up to the sea changes that have taken place in debt collection. “The situation is now dramatically different to what it was prior to the NCA.”
Debt collectors that use courts hundreds of kilometres away from where a debtor who is allegedly in default lives to obtain a debt judgment, and force an employer to repay a debt on behalf of the employee, are making it virtually impossible for debtors to have access to justice, he says.
Logan says that when a debtor consents to the jurisdiction of a court, the creditor usually has a contractual and statutory basis on which to proceed in that court.
“However, as the NCA and several court judgments pursuant to the NCA have made clear, credit providers should now collect the debt in the court where the debtor resides or works.
“The courts may unwittingly process debt collection orders in jurisdictions other than those in which the debtor works or resides. In these cases, the courts should overturn such orders on the basis of the provisions of the NCA and the case law on jurisdiction.”
The better-staffed courts are implementing the new procedural rules, he says.
This principle is also at issue in the Nimble case, namely, whether or not the debtor was provided with a real opportunity to defend herself.
“Clearly, in these cases the debtors have been excluded by making access to justice nigh impossible,” Logan says.
The term “garnishee order” is used incorrectly to describe an emoluments attachment order (EAO). An EAO gives a credit provider the right to dock your wages or salary in order to repay a debt. A true garnishee order refers to the attachment of a debt owed to a third party, and is usually a once-off arrangement, such as money owed to a debtor for work that results from a contract.
With an EAO, the employer is referred to as the “garnishee employer” – hence the confusion.
DEBTOR LIVES IN CAPE TOWN, BUT JUDGMENT WAS OBTAINED IN NORTH WEST
Debt collection company Nimble uses lawyers across South Africa to obtain debt judgments and emoluments attachment orders (EAOs) in magistrate’s courts that may be hundreds of kilometres from where debtors live and work.
In the case challenged by Cape Town businessman and lawyer Tinus Slabber, Nimble used Gerhard van der Merwe Attorneys in Nelspruit in Mpumalanga to collect a debt from a debtor who lives in Cape Town, which is 1 750 km away by road. The head office of Nimble is in Cape Town.
Gerhard van der Merwe Attorneys then used a law firm 360 km from Nelspruit, Tlhatlha Attorneys, in Temba in the magisterial district of Moretele in North West, to apply for the debt judgment and EAO against Slabber’s employee. Temba is 55 km north of Pretoria and 1 500 km from Cape Town by road.
Slabber says this is inexplicable, and he can conclude only that this approach to obtaining debt judgments is deliberately designed to make it difficult for defaulting debtors, who usually have little understanding of the court system and cannot afford legal advice, to challenge the judgment.
Slabber says it is unlawful to obtain an EAO in a magisterial district where a debtor does not live or work.
In its response, Nimble says it engages law firms that it believes have specific expertise in debt collection.
Nimble does not explain why the judgment and EAO were obtained in Temba, when the debtor lives and works in Cape Town.
However, Nimble claims that “we do not condone any unlawful, unethical or improper practices”.
Slabber says what makes it worse for debtors is that, when an EAO is unlawful, it can be set aside only in the court where it was granted. But the sheriff will serve an EAO on an employer in Cape Town, who must implement it even if it is unlawful.
Rene Sunkel, of Gerhard van der Merwe Attorneys, denies Slabber’s allegations and that the firm acted unlawfully. But Sunkel does not explain why the firm withdrew the judgment and EAO, cancelled the debt and agreed to pay R25 000 for costs after it was challenged by Slabber.
Slabber’s employee had agreed to repay, at a rate of R400 a month, a total debt of R5 707, which was made up of R3 142 (from an initial debt of about R2 000), plus R2 565 for legal costs, as well as interest at a rate of 15.5 percent on the outstanding debt.
In addition, the employee had to pay debt collection fees of 10 percent on each repayment of R400.
Despite agreeing to abandon the claim against Slabber’s employee, Sunkel says Gerhard van der Merwe Attorneys “strictly follow the debt-collecting procedure laid down in the relevant sections of the Magistrate’s Courts Act and the National Credit Act.
“We vehemently deny that, as far as (Slabber’s employee) is concerned, the debt-collecting process was abused in any way” or that the EAO was unlawful.
Sunkel refused to answer questions about how many debt judgments and EAOs the law firm has obtained on behalf of Nimble, saying the question is irrelevant, because the firm follows the correct procedures.
Slabber says the Law Society should investigate the matter.
Nimble says it expects to receive lawful, ethical and professional services from its service providers at all times.
“Nimble did not give any instructions to Gerhard van der Merwe Attorneys in respect of the way in which specific procedural issues had to be addressed (namely, consent to jurisdiction and service on debtors), nor did Nimble at any time … instruct the attorneys to tender and/or pay costs on its behalf, which costs we believe have been paid personally by the attorneys.
“The specific actions and decisions … were initiated and executed by the attorneys on their own accord without our knowledge and/or instruction.”
But Sunkel says this is not correct.
“Gerhard van der Merwe Attorneys were acting on the instructions of Nimble in settling the matter with Mr Slabber’s employee,” she says.
Nimble says Slabber’s “inferences that we were party to any of these actions are based on his assumptions and are devoid of all truth”.
Nimble says it is seeking independent legal advice on the interpretation of the legislation as to whether its attorneys acted legally.
“We do not support or condone any abuse of the legal system and/or process, and we concur fully that the law should be applied fairly and ethically in these circumstances.”