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A Fin24 user is worried about an employee who has a garnishee order against her as it seems she will never be able to pay it off. He writes:
Can anyone give me advice on one of my employees who was issued with a garnishee on a debt of R4 300?
After paying off R4 600 the statement sent to her indicated a balance of R6 500.
On challenging the lenders, I was told that the interest rate is 60% per year, calculated compound.
At this rate she will forever be paying them. Is 60% interest legal?
They say she agreed to it by signing the form. I say this is evil and needs addressing.
Nichola Woodard of HWD Attorneys responds.
The term “garnishee order” is often confused with an “emoluments attachment order”.
An emoluments attachment order (EAO) is an order granted in terms of Section 65J of the Magistrates Court Act in terms of which an employer (also referred to as a garnishee, which is why it is often mistakenly referred to as a garnishee order) is ordered to make monthly deductions from a debtor’s salary and to pay this to the judgment creditor.
On the other hand, a garnishee order is granted in terms of Section 72 of the Magistrates Court Act and authorises an application to attach any debt owed or to become due to the debtor (for example the proceeds of a sale of property held by a conveyancing attorney).
Section 72 garnishee applications can only be used in limited instances where the creditor knows of a specific debt owed to the debtor.
On the other hand, EAOs have proved to be an effective means of legal debt collection.
They can be obtained either where the debtor has consented to the order or in terms of a court application.
In practice most EAOs are obtained through the debtor signing a Section 57 or 58 Consent to Judgment incorporating a consent to an EAO to pay the debt in specified instalments, which may very well have been the case here.
The unfortunate reality is that a lot of EAOs are not validly issued and are often used irregularly by unscrupulous creditors.
Consequently your initial considerations should be things like:
Has the document been stamped by the clerk of the court? Is a case number clearly indicated? Is the employee properly identified?
Does the clerk of the court’s signature and the creditor’s attorney’s signature appear on the order?
As a result of these orders often not being validly issued or having being obtained by the debtor’s “consent” and not having passed through the court’s scrutiny, the substantive provisions pertaining to issues such as interest are often disregarded.
For instance, in terms of the National Credit Act of 2005, any interest which accrues while the debtor is in default may not in aggregate exceed the unpaid balance of the principal debt.
This has clearly been contravened in the case at hand and it would seem that the order was obviously not considered by the court.
The Magistrate's Court Act provides that an EAO can be set aside if a good reason can be shown to do so.
A good reason would be that your employee has in fact already paid the debt and the interest claimed is too high and is conflict with the National Credit Act.
However, it would be necessary to go to court to have the order set aside. I would recommend that you approach an attorney for assistance.
The opinions expressed herein are based on the information as received from you and the assumptions made.
If the information as set out herein or our understanding thereof is in any way incorrect, please inform us immediately in order for us to amend the opinions where necessary.
It should be emphasised that due to the limitations of this type of forum, the above is only a general outline of a potentially complex matter and it is recommended that you obtain further detailed advice before taking action.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
Can anyone give me advice on one of my employees who was issued with a garnishee on a debt of R4 300?
After paying off R4 600 the statement sent to her indicated a balance of R6 500.
On challenging the lenders, I was told that the interest rate is 60% per year, calculated compound.
At this rate she will forever be paying them. Is 60% interest legal?
They say she agreed to it by signing the form. I say this is evil and needs addressing.
Nichola Woodard of HWD Attorneys responds.
The term “garnishee order” is often confused with an “emoluments attachment order”.
An emoluments attachment order (EAO) is an order granted in terms of Section 65J of the Magistrates Court Act in terms of which an employer (also referred to as a garnishee, which is why it is often mistakenly referred to as a garnishee order) is ordered to make monthly deductions from a debtor’s salary and to pay this to the judgment creditor.
On the other hand, a garnishee order is granted in terms of Section 72 of the Magistrates Court Act and authorises an application to attach any debt owed or to become due to the debtor (for example the proceeds of a sale of property held by a conveyancing attorney).
Section 72 garnishee applications can only be used in limited instances where the creditor knows of a specific debt owed to the debtor.
On the other hand, EAOs have proved to be an effective means of legal debt collection.
They can be obtained either where the debtor has consented to the order or in terms of a court application.
In practice most EAOs are obtained through the debtor signing a Section 57 or 58 Consent to Judgment incorporating a consent to an EAO to pay the debt in specified instalments, which may very well have been the case here.
The unfortunate reality is that a lot of EAOs are not validly issued and are often used irregularly by unscrupulous creditors.
Consequently your initial considerations should be things like:
Has the document been stamped by the clerk of the court? Is a case number clearly indicated? Is the employee properly identified?
Does the clerk of the court’s signature and the creditor’s attorney’s signature appear on the order?
As a result of these orders often not being validly issued or having being obtained by the debtor’s “consent” and not having passed through the court’s scrutiny, the substantive provisions pertaining to issues such as interest are often disregarded.
For instance, in terms of the National Credit Act of 2005, any interest which accrues while the debtor is in default may not in aggregate exceed the unpaid balance of the principal debt.
This has clearly been contravened in the case at hand and it would seem that the order was obviously not considered by the court.
The Magistrate's Court Act provides that an EAO can be set aside if a good reason can be shown to do so.
A good reason would be that your employee has in fact already paid the debt and the interest claimed is too high and is conflict with the National Credit Act.
However, it would be necessary to go to court to have the order set aside. I would recommend that you approach an attorney for assistance.
The opinions expressed herein are based on the information as received from you and the assumptions made.
If the information as set out herein or our understanding thereof is in any way incorrect, please inform us immediately in order for us to amend the opinions where necessary.
It should be emphasised that due to the limitations of this type of forum, the above is only a general outline of a potentially complex matter and it is recommended that you obtain further detailed advice before taking action.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
