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We want to change the law – Wendy Applebaum

Abuses in the unsecured lending system ‘appalling’.

HANNA BARRY: Well-known businesswoman and philanthropist Wendy Appelbaum is involved in an action being brought by the University of Stellenbosch’s Legal Aid Clinic (LAC) on behalf of 15 consumers, and against 13 credit providers. The LAC is challenging the legality of emolument attachment orders (EAO) of incorrectly called garnishee orders. Now EAOs are served on employers by creditors forcing these employers to make deductions from their employees’ salaries to repay said creditors. The way in which they are granted is often controversial and sometimes downright illegal. So this is certainly a very important case.

Joining me now to talk about her involvement is Wendy Appelbaum herself. Wendy thank you for your time today. How did you become involved in this case?

WENDY APPELBAUM: My interest in this case really started with some of my farm workers whose salaries were being attached to up to 80%. I think there was also a lot of noise from the outcomes of the farms strike and it became obvious that Marikana was really…probably the underlying cause of Marikana was this abuse of the credit system where people were literally working and taking home absolutely no salary whatsoever. And technically, they had nothing further to lose. They had lost their dignity, they had lost everything – their constitutional and civil rights and it just made me unbelievably angry. I think it affects productivity, it affects human dignity and I just thought it was one of the most appalling things that I’d ever seen.

HANNA BARRY: Absolutely and that led you I assume to become involved with the LAC.

WENDY APPELBAUM: I think I started to delve into it…I went to the bookshop in Stellenbosch and I bought the National Credit Act and the Magistrates’ Court Act and I actually sat down and I read them to really understand this issue for myself. I think that a lot of employers just pay these things and certainly you know, up till that point, I did pay them on behalf of my workers. But only when I really realised that there was a limit to this – there’s an amount at which you can take no more before there is starvation.

So once I understood the laws surrounding it I realised that there was a lot of work to be done in this area. And what I really did was I looked at the research – who was looking into these things, was Pretoria University. The fact that I live in Stellenbosch, Stellenbosch University Law Clinic is literally inundated with these cases. They’ve got hundreds and hundreds of cases of absolute reckless lending, and they are fighting these on behalf of the poor. And I think that one of the things that really, really drove me absolutely wild was that the poor had no access. Firstly, they have no access to the law because of their financial situation, but I mean, we found that the majority of these emolument attachment orders were off jurisdiction. So they were popping up in De Aar and Kimberley and Beaufort West and all these outlying places, simply to cut off any redress to the law. So they were – the workers and employers could not get to the bottom of these. Nothing to verify the fact of whether or not they were actually legal.

Certainly some of your investigations from Moneyweb have been looking into this problem for a long time. And the fact that they were being stamped by Clerks of the Court who had no judicial oversight, they were not given the correct papers in order to make an intellectual or intelligible garnishing against the salaries – they were just simply stamping them as if they were a post office. And if you can look – and you could tell that there were certain courts that were sending out enormous volumes and clearly I think one must look at the fact that there might have been fraudulent activity in some of those courts anyway. And it was interesting that certain credit providers were using certain courts and so I think there was abuse from that. And I think with judicial oversight where a magistrate has to sit down and carefully consider the consequences and the effect on the lives of the poor, I think will make an enormous difference.

HANNA BARRY: Ja, and that is obviously one of the things that this action would like to see happen amongst quite a range of things. What is your involvement in the action being brought by the LAC?

WENDY APPELBAUM: You know, mine is really a collaboration of, and a coordination of other people who have the same issues with this. So its like-minded people, civil society coming together and saying actually enough is enough.

There were studies that came out in 2008 – the University of Pretoria did a study on behalf of the German GIZ Institute (Gesellschaft für Internationale Zusammenarbeit) which came up with very serious recommendations and quite frankly, I cannot believe that the National Credit Regulator has not done anything about this. They redid the study and updated the data which was very interesting – you should try and get hold of it – in 2013 and still nothing happens. You know, I am not sure that this is necessarily civil society’s job, but if it’s not being done, I think we are duty bound actually to do this on behalf of the poor.

HANNA BARRY: Absolutely…

WENDY APPELBAUM: You know, I think our lives begin and end – the day that we become silent about things that matter – Martin Luther King said this really a long time ago, and I think if we’re going to live in this country we cannot sit by and watch this kind of abuse – it is not in the best interests of the country.

HANNA BARRY: And what are you hoping that the outcome of this action will be?

WENDY APPELBAUM: Well I think that we will probably – firstly, we want to change the law and I think that we will basically give priority to somebody like the National Credit Regulator, to the Treasury, to the powers that be, to really take some responsibility that this is really out of control and that they need to tighten up any loopholes that may or may not exist, and they need to make this incredibly water tight. And I think that this will – people need access to credit, but they need access to responsible credit and affordable credit. And this will reduce enormously the amount of abuse that’s going on in the system.

HANNA BARRY: Are you of the view that EAO should be outlawed altogether, or do you think there is a place for them?

WENDY APPELBAUM: Emolument attachment orders have got a great social significance to play in this country, certainly in terms of child maintenance and those kinds of things, and in terms even of debt collection, I think that they have a role to play. I think that with judicial oversight we will get to some of the really major abuses, the falsifying of means tests, the fraudulent use of signatures, the bullying that goes on, the excess charges in terms of legal fees and breaching in-duplum laws – those will become perfectly evident and with proper judicial oversight with the right papers in front of them and with the duty that the government has to a system where there’s access to other debt that the individuals have. You know, we’ve got people that have got four or five or six garnishee orders against them. In fact my worker was given his second loan when in fact he was – with the same company – when he was in fact in debt already. So we are talking about these situations and clearly he couldn’t afford either of them.

HANNA BARRY: And as you mentioned, we need responsible lending. How would you like to see that happen – the behaviour of credit providers – how does that need to change?

WENDY APPELBAUM: Well I certainly think that they need to do assessments of affordability and I really do believe that the real use for access to credit in fact is providing capital – generate economic activity, private enterprise. But what seems to have happened is that there’s almost an unwritten security in the fact that they are giving it to people who are already employed because they have first access to their salaries. They become the preferred credit provider.

So I think if people are not caught in debt traps they will be able to afford to responsibly repay their debt, in which case you will not need as many EAOs as are currently in the system. And if the system was doing the right job for society, you wouldn’t need EAOs of the magnitude that they are being used. But certainly that’s one way. One of the interesting things is that the major banks have actually, through the Banking Association, come together and made a commitment not to use EAOs at all and you should probably engage with them on this and the fact that it’s had absolutely no effect on their ability to collect debt. What it has done, is its reduced reckless lending in the market.

HANNA BARRY: Do you think we are going to see more of these kinds of actions and applications in future, Wendy?

WENDY APPELBAUM: Well I was clearly delighted to see that Amplats has joined in the fight and I think it’s fantastic. As long as the situation and the upliftment of the poor can be done by civil society, the more the merrier. And I have no doubt that others will join the fight.

HANNA BARRY: Well I certainly hope so too. That was well-known businesswoman and philanthropist, Wendy Appelbaum.

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