“There is nothing wrong with the system” of issuing emolument attachment orders (EAOs) and “there’s no need to change the law”. This is what the advocate who represents a firm of debt collection attorneys told Western Cape High Court Judge Siraj Desai this week. The outcome of the case, which challenges how EAOs are issued, is important for the credit industry, the legal fraternity and the 10 million credit-active consumers in arrears.

The attorneys in the dock are Flemix & Associates, which does debt collection for 45 credit providers countrywide. According to court papers, the firm has 150 000 active cases, and “the total value of the books that it collects is R1 597 585 832”. In other words, Flemix is trying to recover R1.6 billion in outstanding debt for credit providers. This amount excludes collection costs. Flemix does this using EAOs, which are often incorrectly referred to as garnishee orders. An EAO is a court order that compels your employer to deduct money from your salary every month for debt owed to a creditor that has obtained judgment against you.

EAOs are widely used to ensure the repayment of unsecured debt, but they can be, and are, used for the repayment of secured debt, too.

The abuse of EAOs is widespread and well documented. These abuses range from fraudulent signatures on documents, coercing consumers to sign documents and collecting more than what is legally due.

One of the points being argued in the Flemix case is which court should have jurisdiction to grant judgments on which EAOs are based. Often, debtors are induced to consent to the judgment being granted in a court that would not normally have jurisdiction. For example, if the consumer lives in Stellenbosch, the judgment and EAO should be issued in the Stellenbosch magistrate’s court. But it is not uncommon for credit providers or their debt collection agents to get consumers to agree to judgment being granted in a jurisdiction in which the consumer does not live or work. It is not entirely clear why they do this, but it might be because they know that magistrates in the appropriate jurisdiction will not issue EAOs easily. Magistrates are becoming stricter about issuing judgments and EAOs, and magistrates have different requirements for granting these orders.

Consent to jurisdiction is usually obtained by a debt collector who calls on a consumer at work. The consumer, who may be uninformed or illiterate, usually consents unwittingly, or without understanding the consequences of not being present in court when the court order is issued.

Until early 2014, judgments were being issued by clerks of civil courts and were not subject to judicial oversight (the scrutiny of a magistrate or judge).

The argument in court this week is that when the EAO is issued, a magistrate needs to ensure that it does not result in you, the debtor, having insufficient means to maintain yourself and your dependants. For this reason, it is important for a debtor to be present when the order is granted.

The University of Stellenbosch Legal Aid Clinic (LAC) and 15 consumers who have EAOs against them are the applicants in the case before Judge Desai. They say that the issuing of an EAO without judicial oversight is unconstitutional, and they want sections of the Magistrates’ Court Act declared invalid and unconstitutional.

Piet Louw, Flemix’s counsel, this week said that the law, as it stands, provides for complete judicial oversight by a magistrate who decides to grant default judgment and order that the creditor is paid in instalments. The clerk merely puts into operation what the magistrate has decided, he said. “Flemix’s problem is that some courts have requirements that can’t be met – bizarre requirements, like a copy of the National Loans Register, which doesn’t exist,” he said.

Louw told Judge Desai it was not for him to be an “activist judge” or to make laws. “Watch out: this is a job for the legislature. Judicial deference is the way out,” he said.

This week, the South African Human Rights Commission (SAHRC), acting as a friend of the court, suggested that when an EAO exceeds 30 percent of a debtor’s salary, it should raise alarm bells. The SAHRC submitted that a cap may be an option for the legislature to decide.

The case could have far-reaching consequences for consumers of credit, Reana Steyn, the Deputy Ombud at the Credit Ombud’s office, says.

“If the court decides that there needs to be more oversight in the issuing of EAOs, that’s good news for consumers. It would curb or eliminate a lot of the abuses that we currently see. But if the court decides there is already sufficient oversight, there needs to be lobbying for law reform, and consumers will continue to need assistance with these orders, as they do not understand the processes and are not able to dispute the order or the amounts. Until this issue is resolved, consumers need to be very vigilant about what they sign,” Steyn says.

The case continues on February 23.


The case brought by the University of Stellenbosch’s Legal Aid Clinic (LAC) to challenge the constitutionality of how emolument attachment orders (EAOs) are issued is the result of a powerful collaboration between an altruistic employer, a financial wellness company, a university’s law clinic and a law firm.

It began with philanthropic businesswoman and wine producer Wendy Appelbaum. “I became aware of the plight of one of my workers, from whom we were legally obliged to deduct most of his salary on behalf of loan sharks. I immediately addressed his circumstances, but discovered how widespread the abuse of garnishee orders had become. I was outraged and decided to intervene on behalf of the helpless and voiceless victims, and have played a convening and facilitating role,” Appelbaum says.

Clark Gardner, the chief executive of Summit, says this is an understatement. “Wendy did most of the hard yards collating the information, masterminded the attack, [chose] the parties involved, including Summit, and made it happen.”

Summit offers audit services to employers who have employees with EAOs, as well as to individuals who have EAOs.

Appelbaum describes her philanthropy as strategic, as opposed to charitable, in the sense that money alone does not solve problems. She believes in funding initiatives that tackle societal issues.

The LAC is the main applicant in the case. It provides free legal services to the poor, mostly farmworkers in the Western Cape winelands.

The case is being handled pro bono by Webber Wentzel’s Pro Bono Practice.

This is not the first time that Appelbaum has taken the lead in a significant case. She took on auctioneer Rael Levitt for “ghost bidding”, which led to the demise of Auction Alliance. Appelbaum is the daughter of Donald Gordon, who founded Liberty Life.