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Banks and others could be forced to make up for thousands of bad garnishee orders from years ago.

Garnishee Orders (Actually EAOs)

Garnishee orders are legal notices that tell employers to take money directly from one person’s salary to pay off debts.

In most cases, banks and other credit providers used what have commonly been called garnishee orders (but are actually Emolument Attachment Orders) to take money from people’s salaries to settle debt.

‘SA has a bit of a problem history with Garnishee orders (EAOs)’

SA has a bit of a problem history with Garnishee orders (EAOs). Unfortunately, they have often been misused, leading to many unlawful orders that have affected people across the country for decades.

This past misuse has now put big microlenders, like Capitec, in the spotlight as they might face the possibility of having to pay back thousands of affected debtors.

The Good Old Bad Old Days

In the past, shady practices were pretty common in getting garnishee orders.

Some microlenders and debt collectors would go “forum shopping,” using distant magistrates’ courts to get orders where people simply couldn’t afford to go and defend against.

In some shocking cases, there were even cases of outright fraud, like the banks or other credit providers forging signatures.

This is why back in 2013, the Constitutional Court stepped in, ruling that garnishee orders should not be routinely issued by court clerks, which was a big win for debtors. The ruling required that Magistrates have a look at any such orders and do some math and set minimum requirements before allowing more and more deductions from people’s salaries.

However, this landmark ruling didn’t apply to orders issued before that year, leaving many people stuck with old, unlawful orders.

Fast forward to today, and we now have a company called GORR that’s fighting to change that. They’ve been hiring attorneys to overturn old, illegal garnishee orders, and much to some credit providers distaste they’ve been winning quite a few cases.

The Capitec Case

Capitec Bank is now involved in a major case involving such matters, and the stakes are quite high.

If Capitec is found liable, it could potentially lead to a wave of similar claims from other people who had the same thing happen to them years ago. You can imagine the effect that would have on share prices.

This case could really shake things up in the entire South African microlending world and open the floodgates with hungry attorneys and upset consumers going after the banks and others about these older matters.

Who knows what will happen ?

Will David take on and beat Goliath? It’s hard to know.

But whatever the outcome, all these legal battles are a serious wake up call for the microlending industry.

Companies like Capitec are currently gearing up to defend themselves and obviously have to deny that there is a big problem, but some people say that this whole situation is actually a great chance for the industry, to clean up its act.

They say that better legal oversight will help stop future abuses and will protect vulnerable debtors and ensure a fairer financial system for everyone.