JOHANNESBURG – Prolific businesswoman and philanthropist, Wendy Appelbaum has joined forces with financial wellbeing firm Summit and law firm Webber Wentzel to bring unscrupulous credit providers to book in court next month.
The court action, brought by the University of Stellenbosch’s Legal Aid Clinic (LAC) on behalf of 15 consumers (applicants), looks set to expose abuses by credit providers and dramatically reduce the number of illegal emolument attachment orders (EAO) plaguing a broken system.
The action is being brought against 13 credit providers and the law firm that facilitated these EAOs, Flemix & Associates.
Aside from wanting to have what appear to be illegal EAOs declared null and void, the LAC is challenging the constitutionality of certain sections of the Magistrates’ Court Act (MCA). Chiefly, it argues that failing to subject EAOs to careful inspection by a judge through allowing often ill-informed clerks of court to process most of them, denies consumers their rights to human dignity and access to justice.
The LAC, which is the first applicant in the case, says judgement debtors are duped into signing papers by collection agents who arrive unannounced at their workplaces pretending to be in a hurry and requesting their signature on documentation that debtors can often barely read, let alone understand. “They [collection agents and credit providers] exploit ignorance,” comments Mathilda Roslee, financial literacy project coordinator at the LAC.
Roslee says debtors often sign under the pretence that they are simply acknowledging that the collection agent paid them a visit. In other cases they are threatened with incarceration or loss of property if they don’t sign.
The applicants are induced into “signing documents consenting to jurisdiction of courts in distant towns the applicants have no hope of approaching for relief”, writes LAC director, Kruger van der Walt in his court papers. In terms of the MCA, correct jurisdiction is one where a consumer lives or works.
The lack of proper inspection by a judge means these irregularities go unnoticed; no enquiries are made as to the lawfulness of the debt; and no regard is paid to whether the debtor can actually afford the deductions, which sometimes amount to more than half a sole breadwinner’s salary.
These binding EAOs are then served on employers who have no option but to comply and deduct the amounts from employees’ salaries.
Wendy’s on a mission
Appelbaum, owner of De Morgenzon wine estate, says her interest in the case began when she learnt that some of her farmworkers had up to 80% of their salaries attached via EAOs. “They had lost their constitutional and civil rights and it made me unbelievably angry. It affects productivity and human dignity; it’s one of the most appalling things I’d ever seen,” Appelbaum recalls.
Having done her research (she got her hands on the National Credit Act and Magistrates’ Court Act handbooks), Appelbaum realised there was much work to be done and began to mobilise her networks.
Now, the LAC, together with the 15 applicants (consumers) will be represented by the pro bono practice of law firm Webber Wentzel between February 16 and 20 in the Western Cape High Court. Meanwhile Summit, which protects employees from unscrupulous lenders and collectors fighting invalid EAOs on a daily basis, has agreed to stand surety on any losses the LAC may incur.
Summit CEO, Clark Gardner says he hopes as an outcome of the case that the Department of Justice (DOJ) will be given six months to make changes to the MCA to bring it in line with the Constitution. He says Summit has been lobbying for such consumer protection changes since 2004.
“Judicial oversight, where a magistrate must sit down and carefully consider the consequences and the effect of an EAO on the lives of the poor, I think will make a huge difference,” Appelbaum adds. “People need access to responsible credit and affordable credit. I think this [court case] will reduce enormously the amount of abuse going on in the system.”
“Wendy’s the driver and the main source of passion behind this initiative, and no doubt it wouldn’t take place without her,” says Gardner.