High Court Battle Won – War Against Unlawful EAOs Goes On

Judgement Day for Unlawful EAOs

A week after Judge Siraj Desai ruled in favour of 15 consumers represented by the Stellenbosch Legal Aid Clinic in the High Court, the National Credit Regulator (NCR) has announced it will be launching a “widespread investigation” into all of the Emolument Attachments Orders (EAOs) obtained by the liable debt collection legal firm, Flemix & Associates.

EAOs are court orders granted in favour of credit providers. These court orders allow for the attachment of a percentage of a consumer’s salary each month, which their employer is required to pay to a credit provider, or their debt collectors.

During proceedings, it was uncovered that Flemix obtained the EAOs illegally, by engaging in ‘forum-shopping’, which entails seeking out courts that are well-known for issuing EAOs liberally.

Coerced Consent to Judgment

The NCR will be scrutinising the relevant consent to judgments, to see if consumers signed these orders as a result of bullying or misunderstanding the consequences thereof. Signing a consent to judgement implies the consumer knowingly agreed to excessive deductions being made from their salaries each month.

It goes without saying, the likelihood of consumers signing these documents, had they understood the implications, is dubious at best. The NCR will also be checking the credit agreements, underlying the EAOs Flemix obtained, to see if any of these constitute reckless lending.

True to form, Flemix & Associates responded to the judgment by stating it will be launching an application for leave to appeal, concerning specific areas of the judgement. Sadly, this means the full effect of the judgment will be delayed.

Nonetheless, a joint statement by the Department of Trade and Industry (dti), the National Treasury, and the Department of Justice and Correctional Services will soon be released, ‘to communicate action that will be taken to bring about the benefits of this court order to all affected consumers’, according to dti.

A Glimmer of Hope – a Long Way to Go

The Government recently published a tender for a service provider to examine the vast public sector payroll.  The purpose being to ascertain how many government employees have unlawful EAOs attached to their earnings. This undertaking could set in motion the cancellation of countless Emolument Attachment Orders.

Considering Flemix collects debt on behalf of 45 creditors, claiming to have 150 000 active cases, worth R1.5 billion, NCR members certainly have their work cut out for them. Similarly, according to research acquired via compliance audits of debt collection firms, the Law Clinic discovered that +/-800,000 consumers had EAOs in 2013.

South Africa has a long way to go before all unlawful EAOs are done away with and justice is trully served. Regardless, consumers should feel empowered by this recent judgement. The battle is won, but the war rages on.  Employers, consumers, whistle-blowers and interest groups alike must stand up and fight against corrupt debt collectors, reckless lenders and unlawful Emolument Attachment Orders.