Slap on the wrist for debt-collecting attorneys who racked up R1.6bn in EAOs
Forum shopping was an unethical practice highlighted in the Desai ruling whereby debt collectors obtained EAOs against consumers in jurisdictions outside where they lived or worked, often far afield, which meant they were unable to defend those orders to try to mitigate their harsh consequences.
The penalty, a fine of R30000, has been criticised as falling far short of being a deterrent for other legal practitioners found guilty of similar behaviour.
The firm in question, Flemix & Associates, had obtained up to 150000 EAOs worth about R1.6billion against vulnerable debtors.
GroundUp reported last week on the LPC ruling against Flemix. The ruling was made on October 4 last year, but not publicised.
In 2014, the Stellenbosch University Law Clinic went to court on behalf of 15 low-income cleaners, security guards and farmworkers against micro-lenders represented by Flemix. The complainants had been granted loans, many at interest rates of 60% a year. No affordability assessments had been conducted and repayments often exceeded 50% of their income. Flemix then obtained EAOs against these workers.
In one case, a single mother was garnished for more than half her salary; another applicant was garnished about 90%. At the time, there was no statutory limit on the amount that could be deducted from a debtor’s earnings, nor was there a limit on the number of EAOs that could be granted against debtor.
Noting that the debtors had been caught up in a debt cycle “from which there was little, if any, hope of escape”, Judge Desai declared the EAOs against the complainants “invalid and unlawful”.
He ruled that, in enforcing a credit agreement under the National Credit Act, debtors could not be subject to an order of a magistrate’s court in jurisdictions outside of their residence or place of employment.
Judge Desai urged the SA Human Rights Commission and the South African Law Society (now the LPC) to monitor the situation. Personal Finance could not ascertain to what extent, if any, this had been done.
Judge Desai also instructed the Law Society to investigate whether Alanza Flemix-Jordaan, the firm’s director, and Flemix had breached their ethical duties.
In May last year, the LPC charged Flemix for bringing the legal profession into disrepute by engaging in forum shopping; assisting credit providers to abuse the law regulating the granting of EAOs; and submitting fraudulent documents to the courts to obtain default judgments and EAOs. Another count related to the failure to respond to a request from a specific debtor. It found the firm guilty only on the forum shopping charge.
Unable to respond
Flemix told Personal Finance it was unable to respond to its queries, as Flemix-Jordaan was unavailable.
It previously told GroundUp: “After a thorough investigation through the course of three days during which evidence was led by the LPC, we were [only found guilty of engaging in forum shopping] As a firm, we are extremely happy that this is behind us now and that we were found not guilty on charges brought on unfounded allegations.”
The LPC has neglected to report on both the disciplinary hearing and the fine, which is viewed as a slap on the wrist. Section 38 of the Legal Practice Act requires the council to publish all disciplinary hearings on its website. No such records exist.
Stephan van der Merwe, senior attorney at the Stellenbosch University Law Clinic, told Personal Finance they were unaware of the finding. “We assume the LPC will still publish the disciplinary finding at some stage.
“Even though we were involved in the disciplinary hearing, where we made submissions to the committee, we were not informed about the outcome until the press contacted us about this.”
The LPC insists it has complied with the rules. It was asked for a copy of the ruling, why it hadn’t published its findings, why the fine was so paltry, what reparation had been made to the victims, whether an audit had been conducted on the 150000 consumer files, and to what extent it had given effect to the judge’s directive to ensure appropriate measures were put in place. Senior legal officer Jaco Fourie said: “The finding of guilty and the sanction has in the meantime become public knowledge.”
He said EAOs obtained in the wrong jurisdiction will no longer be allowed and that the council’s disciplinary processes are sufficient to ensure appropriate measures are in place to monitor them, adding an audit of the consumer files was unnecessary.
“The disciplinary committee considered all the evidence and exercised their discretion by imposing a fine. Any person who may have suffered damage would be entitled to recover it through civil court process (sic).
“Both the investigating committee and the disciplinary committee consisted of senior members of the legal profession, who gave serious consideration to the evidence and charges The committee was acutely aware of the public interest in this matter, but had to act independent of public opinion.”
* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.