The debt collection industry is rife with fraud and abuse
I am not the first, nor I suspect the last, that will testify to the fact that the debt collection industry in South Africa is in a total mess. Moneyweb and ENCA have both reported extensively on the topic. Unfortunately, and the powerful National Credit Act notwithstanding, thousands of individuals continue to be exploited via fraudulently obtained court orders and subsequent emolument attachment orders (garnishee orders).
It is perhaps unwise to tarnish every firm of attorneys or debt collection entity as corrupt or knowingly participating in corrupt behavior. As pointed out in attorney publication De Rebus, a garnishee or salary attachment order can be effectively and lawfully (at this point) employed to enforce the rights of creditors. Debt enforcement legislation is a basic necessity, and it can be strongly argued that the garnishee order is required in law.
That being said, the Minister of Justice, together with the Banking Association of South Africa [PDF] jointly declared, amongst other things, that there was a problem with ‘abuse of debt and garnishee orders, and of direct payroll deductions’.
Moreover, corporate law firm Edward Nathan conducted a forensic review and found, amongst others, ‘widespread abuse, exploitation and maladministration’ in relation to garnishee orders. I have personal knowledge of on-going and unabated abuse. A cursory Google search will reveal further several forensic reports and investigative journalism uncovering an industry tainted by corrupt and fraudulent behavior. Devastating incidents, such as Marikana, will continue to be exacerbated by this issue. Strikes will continue to cripple our economy and destabilize foreign investment. Of course this is not all at the door of dodgy debt collecting, but it is a part of a larger problem with South Africa’s socio-economic conditions.
So, with such a lot on the line, why is nothing being done in the short term? It is, to an extent. Affected persons may lodge complaints with relevant statutory bodies, but that deals with only the tip of the iceberg. The uncomfortable truth for government and the influential banking industry is that the ultimate victims of this abuse are the lowest earners in South Africa. They are unaware of their rights and even a complaint to the Law Society of the relevant province will usually only deal with one isolated incident. Law Societies cannot address the underlying issue – Government must intervene.
Many previously disadvantaged, as well as all sectors of low income South Africans are being squeezed into submission by the credit and banking industry – bone fide individual creditors who utilize garnishee orders are in a small minority, the mechanism is the tool of banks, micro lenders and debt collection companies for the most part.
Legitimate creditors have a variety of options available to them to enforce their rights. Simply, the lesser of all evils in this debacle is an immediate suspension of all garnishee orders. Creditors with validly enforceable underlying judgments should not be subject to the limitations of the Prescription Act and in the greater scheme of things will not be overly prejudiced. The overall good far outweighs the harm to put it in its most basic form. The lowest earners in our society will enjoy untold benefit and a rotten industry will be brought to its knees.
The proposed solution is basic, but goes to the heart of the problem and, for the most part, lays the cost of rectifying the issue at the door of micro lenders, banks and debt collection companies. The alternative, which is the status quo, is to do nothing. Watch while the majority of the credit industry milks the poorest of the poor like cows.