Pretoria - The Department of Trade and Industry (dti) has welcomed the judgment by the Western Cape High Court that declared deductions taken from employees’ salaries for emolument attachment orders (EAOs) as illegal and invalid.
Last week, Judge Siraj Desai declared the emolument attachment orders as “unlawful‚ invalid and of no force and effect”. He also found that sections of the Magistrates’ Court Act are “inconsistent with the Constitution”.
Judge Desai said there is insufficient “judicial oversight” over EAOs when they are issued by a clerk of the court without the involvement of a magistrate.
The Magistrates’ Court Act makes provision for such a procedure‚ but only if debtors give their written consent. At the same time Judge Desai found that debtors are routinely influenced to sign forms that they do not understand.
The department said the ruling also paves a clearer way for the National Credit Regulator to enhance its enforcement efforts as it has clarified legal confusion and interpretation issues around the provisions of section 90(2) and section 91 of the National Credit Act. The protection of consumers is clearly the underlying rationale to the limitation of jurisdiction in section 90 and 91.
“The National Credit Act clearly prohibits the requirement for consumers to be made to consent to jurisdiction of courts anywhere other than areas convenient and accessible for them to exercise their right.
“However, loopholes that arise from lack of alignment in legislation continued to open a gap, thus affecting consumer protection negatively,” said the department.
The intention of the National Credit Act is to facilitate access to credit in a fair and equitable manner, while putting controls in place to ensure that credit extended to consumers is extended responsibly and is affordable.
The dti noted that the decision also highlights the need for laws that deal with consumer protection in the credit market to be applied in a harmonised manner to offer optimal consumer protection.
“This also means that affordability assessment criteria that is entailed in the National Credit Act must be applied consistently even at courts when orders that have a bearing on the financial position of a consumer are made.”
The court decision comes at the time when the Department of Justice is at an advanced stage of amending the Magistrate Court Act to be in line with the National Credit Act. The dti said is working with the department and has provided input into this process.
As part of measures to deal with over-indebtedness, the dti has published a draft notice proposing changes to the maximum interest rates and fees that can be charged on credit.
The public has until 5 August 2015 to provide the dti with comments.
In addition, Minister Rob Davies will soon publish the regulations relating to the capping of credit life insurance after a consultation process with the Minister of Finance Nhlanhla Nene has been completed.
This is meant to deal with the abuse of credit life insurance by capping what can be charged, as well as indicating what such cover must include.
Most consumers are sold cover that they do not need, or covering occurrences that are not relevant in their case. These additional unnecessary charges add to the total cost of credit and keep consumers in a debt spiral.
The dti also noted the announcement by the National Credit Regulator that it has referred the company, Lewis to the National Consumer Tribunal for, among other things, selling retrenchment insurance cover to pensioners and self-employed people.
The decision of the National Consumer Tribunal will be useful in determining if this is true, and if so, give redress to the pensioners and those self-employed people.
“The dti wishes to appeal to credit providers to stop extending credit recklessly and without conducting proper affordability tests. Reckless lending leads to a high defaults rate and impaired credit records that affect consumers' ability to participate in the economy.” –SAnews.gov.za
