A recent debt summit in Midrand shows that there is still continued widespread abuse and exploitation of garnishee orders especially in impoverished communities. Statistics revealed at the summit indicate that there are approximately three million garnishee orders in circulation covering between 10% and 15% of employees.
The biggest concern is that the financially vulnerable consumers are paying the highest interest rates and have the highest debt-to-disposable income ratio. These consumers are the least skilled with limited financial skills whose situation is worsened by extended periods of unemployment.
The current economic downturn is worsening the situation with 47% of credit-active consumers having impaired credit records. This means that 9.2 million consumers are directly affected by the impaired credit records and several million are indirectly affected by its implications.
The extent of the abuse
A forensic investigation conducted at a multinational organisation found that 30% of employees had garnishee orders with the worst affected employee having up to 12 garnishee stop orders. There were several employees that had a zero-based pay packet caused by the high number of garnishee stop orders which necessitated urgent action to implemented new measures to protect the vulnerable employees.
The investigation uncovered widespread abuse, exploitation and maladministration across the whole spectrum of service providers involved in garnishee orders. The impact of the issues fell solely on the vulnerable employees because they were suffering the financial burden of irregular debt, interest, costs and fees. The investigation uncovered ten key areas of abuse:
- orders that were never ending because the current outstanding balance was unknown;
- orders were reinstituted on employees after they were informed that the debt was settled;
- orders that were never ending because the monthly interest was higher than the instalment;
- orders that were not validated and were later found to be fraudulent;
- excessive costs charged on orders (excessive charges that exceed prescribed fees);
- double deduction of order instalment amounts through the implementation of secondary debit orders on employee bank accounts;
- excessive interest rates that were levied for several months before being lowered (the incorrect interest was never deducted);
- payments made to attorneys acting on behalf of judgement creditors that could not locate payments made into their bank accounts and charged further interest and costs;
- payments made to incorrect third-parties;
- judgement creditors that could not be traced because they frequently changed contact details.
The situation at the multinational organisation was resolved with the implementation of a specialist garnishee management system and the individual verification of each garnishee order. The verification led to the "cancellation" of several thousand irregular orders that had a significant and positive impact on the employees. The implementation was supported by the creation of a garnishee handbook that was used by the organisation to train their garnishee administration team and to serve as an information booklet for employees that had garnishee stop orders.
It would be helpful at this point to explain what a garnishee order is so that employers and employees are better informed and protected from abuse and exploitation.
What is a garnishee order?
A garnishee is a court order that is served by the sheriff (or messenger) of the court on the employer ordering the employer to make deductions from an employee's salary or wage in settlement of a debt owed by the employee to a third party creditor. A specified amount of money is deducted from the employee's salary or wages each time the employee is paid until such time as the debt owed by the employee has been paid in full. A court will only make such an order where it is satisfied that there is a valid underlying debt, or there has been a valid written consent to the order being taken, or the court has previously made an order instructing that the debtors (employee's) salary or wage be attached.
How much can be deducted from the salary or wage?
The amount to be deducted from the salary or wage must be clearly set out in the garnishee order. The judgment creditor (the person who lent the money) is able to claim the following:
- full amount of the money loaned, less payments already made by the employee;
- interest on the outstanding balance;
- costs incurred by the judgment creditor to collect the money;
- sheriff's fees.
How to determine whether a garnishee order is valid
A genuine garnishee order is an order by the court. It is served by the messenger of the court, also known as the sheriff, on the employer. The sheriff will show the employer the original order and a copy is left with the employer.
The original garnishee order must contain the following:
- a case number;
- a stamp from the clerk of the court;
- signed by the attorney;
- full name as well as identity number or staff number of the employee.
What to do when a garnishee order is served on an employer by the sheriff
When the sheriff attempts to serve a garnishee order on the employer, before accepting such service, the employer must:
- first check that the employee is still in the employ of the organisation. If the employee is no longer in the employ of the organisation, you should not and cannot accept service of the order and the sheriff must be told the person is no longer employed;
- check that the original order has:
- a case number;
- has been originally signed by the clerk of the court;
- has been originally signed by the attorney;
- full name as well as identity number or staff number of the employee on it;
- once you have confirmed that the order complies with the above, and that the employee is still in the employ of the organisation, it must immediately be loaded onto a garnishee system so that deductions can commence from the employees salary or wage;
- a copy of the order must be sent to the employee so that the employee is informed about the order and if the employee has any queries regarding the order, he/she will have the details of the order in his possession to make the queries with the judgment creditor;
- if the order is defective in any way, the employer should advise the sheriff that he refuses to accept service and require the sheriff to record such refusal (although the sheriff will probably just leave a copy with you) and immediately thereafter send a letter to the judgment creditor advising the judgment creditor of the difficulty with the order.
When a garnishee order is granted in respect of an employee, he is not without rights. An employee has the following rights:
- to dispute the amount claimed if it appears to be incorrect;
- to apply to court to reduce the amount of the order when the employee is unable to meet his and his dependents maintenance costs;
- to be furnished, by the creditor or his attorney, free of charge, with a statement containing particulars of payments received up to the date concerned and the balance owing.
If you believe that you do not owe the money at all or you do not owe that amount of money claimed, what do you do?
The Magistrate's Court Act provides that an order can be set aside if a good reason can be shown to do so. A good reason would be:
- that you have already paid the debt;
- that you have paid a portion of the debt and that the amount claimed is too high;
- that you never incurred the debt.
It would be necessary to go to court to have the order set aside.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.