Landmark judgement over unsecured lending?

Earlier this year, the Stellenbosch Legal Aid Clinic (LAC) brought a court action against 13 credit providers and the law firm, Flemix & Associates in the Western Cape High Court.

LAC was seeking to have certain sections of the Magistrate Court’s Act (MAC), relating to Emolument Attachment Orders (EAOs), declared as unconstitutional. 

The decision of which will be heard in the High Court tomorrow (Wednesday, 8 July).

The LAC also reportedly wants some EAOs already in force made null and void, as well as to create more clarity around the law.

“The confusion in law; every court and every magistrate in the court applies the law and interprets the law differently, that creates confusion, and [so the] credit industry –when they do approach a court for relief – what the requirements are.
Because everyone interpreters in differently. And that is why we approached the court, to get clarity,” said Marius Jonker, CEO of the Association of Debt Recovery Agents (ARDA).

Jonker said that the main purpose of the case is to have legal clarity.

“But the legal uncertainly is the reason why credit providers make use of a consent to jurisdiction as they prefer to go through the courts where they know what the requirements are,” he said.

Credit providers obtain the debt owed to them by attaching an EAO to a customer’s salary, having that portion of the money automatically taken from them each month.

Not enough man power

Another one of LAC’s arguments is that clerks of court should not be allowed to process EAOs, as their role doesn’t require them to do this.

However, Jonker doesn’t agree, stating that there just aren’t enough magistrates to accept every EAO case.

“We believe that legally a clerk of the court as the department of justice also believes, and as the current amendments state that the clerk of the court with special training should be allowed to grant such a judgment and EAO orders. It is just not practical if they insist on a magistrate granting such a judgment, the whole judicial system would come to a standstill, because they just do not have the capacity; it would be impossible,” said Jonker.  

Judgement is set to be passed tomorrow morning, and some commentators claim that it could drastically change the way debt is collected in South Africa.