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Credit industry eagerly anticipates court outcome: Hanna Barry – Moneyweb

Action to have sections of the Magistrates’ Court Act declared unconstitutional.

SIKI MGABADELI: We are speaking to Moneyweb’s Hanna Barry, which is in Cape Town, tracking a court case that’s taking place in the Western Cape High Court. It is being watched quite closely by representatives from credit and debt-collection industries.
   The University of Stellenbosch’s Legal Aid Clinic is bringing the court action, which among other outcomes, seeks to have certain sections of the Magistrates’ Court Act declared unconstitutional. That Act governs the granting of emolument attachment orders [EAOs] or what we sometimes refer to as “garnishee orders”.
   Hanna, thanks for your time this evening. Why is this particular case so significant?

HANNA BARRY: Hi, Siki. Well, it seems that it’s a lot more important than I think many people have realised. And really it’s because it’s going to have important significant for debt collectors – how legal debt is collected. As you mentioned, emolument attachment orders are commonly used. That’s where a portion of someone’s salary is attached when they owe an outstanding amount.
   And it’s an important mechanism to collect on debt. It’s used for maintenance orders, it’s used to collect municipal accounts. And the Legal Aid Clinic of Stellenbosch is not saying throw [them] out. They do recognise the importance of them in an economy, but they are just saying that the way that [orders] are granted is often…abuse.
   The problem, though, is that if you make it impossible to grant EAOs, you’ll find credit providers become more hesitant to issue credit because they are worried that they won’t be able to collect on that credit should the debtor not pay. So it’s important for the future, really, of unsecured lending in South Africa.

SIKI MGABADELI: Absolutely. And who is the Legal Aid Clinic representing?

HANNA BARRY: The Legal Aid Clinic is representing about 13 consumers – debtors who have these attachment orders against their salaries. A number of them are farm workers in the Western Cape and they are bringing the case against 13 to 15 credit providers, lenders, as well as a legal firm Flemix & Associates, who administer these emolument attachment orders.

SIKI MGABADELI: I understand the National Credit Regulator is also among the respondents.

HANNA BARRY: It is indeed. The National Credit Regulator is as well as the Department of Justice. So the Department of Justice is another of the respondents because the Magistrates’ Court Act falls under the DoJ. Of course the National Credit Regulator is interested insofar as credit agreements under the National Credit Act are granted. That would fall under the National Credit Regulator.
   So it’s interesting that those regulators are involved too, which of course elevates the matter. And the SA Human Rights Commission has also got involved as a friend of the court, and they will make submissions, just as a friend of the court. They aren’t an applicant or a respondent, but they are going to make submissions. So it’s really quite an important case.
   Also in court today I must mention was Wendy Appelbaum, the prolific businesswoman and philanthropist. She is really the one who started to drive this whole issue when she realised that some of the farm workers on her wine farm, DeMorgenzon, had these attachment orders against their salaries and they weren’t able to survive.

SIKI MGABADELI: All right. We are going to be watching this one closely and you are going to keep us updated throughout the week. Thank you so much, Hanna.

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