A recent debt summit in Midrand shows that there is still continued widespread abuse and exploitation of garnishee orders especially in impoverished communities. 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.
Statistics revealed at the summit indicate that there are approximately three million garnishee orders in circulation covering between 10% and 15% of employees.
According to Peter Allwright, Senior Associate at ENS (Edward Nathan Sonnenbergs), the biggest concern is that 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.”
He notes that 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.
Allwright says 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.
“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; it must be signed by the attorney; and it must show the full name as well as identity number or staff number of the employee.
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,” says Allwright.
“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.”
Allwright says the investigation uncovered ten key areas of abuse including orders that were never ending because the current outstanding balance was unknown; orders being 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; and orders that were not validated and were later found to be fraudulent.
“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.”
He notes that 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.
“If someone believes that they do not owe the money at all or that they do not owe the amount of money claimed – and can show that they have either already paid the debt; paid a portion of the debt and that the amount claimed is too high; or that they never incurred the debt, they can go to court to have the order set aside,” Allwright concludes.