Court challenge to dodgy microlending by Ann Crotty, October 12 2014, 10:40 IN AN unprecedented legal challenge, the University of Stellenbosch’s Legal Aid Clinic (LAC) is taking on the justice and trade and industry ministers, the National Credit Regulator, 13 microlenders and a law firm in a case that could overturn the microlending system that has crippled thousands of consumers. The case against the legality of emoluments attachment orders (EAOs) served against the 15 clients the LAC represents includes challenging the constitutionality of sections of the Magistrates’ Courts Act, which allows an indebted consumer’s salary to be attached without adequate court oversight. If the LAC is successful, the days of unscrupulous microlenders and debt collectors may be numbered. EAOs are commonly but incorrectly referred to as garnishee orders. LAC advisers described how the act has been abused on an almost industrial scale. Most of the forms being signed are in English, which invariably is not the first language of the consumers involved. Credit providers are obliged to ensure a borrower has sufficient funds to live on after repayments are made, but the “affordability forms” that are part of loan applications are often abused. In one instance, a farmworker earning R2 400 and supporting a wife and five children was said to have monthly expenses of only R50. The LAC’s seven-year battle with credit providers has secured relief for some individuals, but unscrupulous credit providers are still scoring. Kruger van der Walt, director of the LAC, said the evidence showed “a pattern of credit being advanced recklessly to indebted and desperate low-income consumers, the use of intimidation, duress and other coercive measures to induce the applicants into signing documents consenting to jurisdiction of courts in distant towns the applicants have no hope of approaching for relief”. Zodwa Ntuli, deputy director-general at the DTI, said: “The relatively easy access to EAOs means that it is not a risk for credit providers to lend recklessly.” She said the government was concerned about the abuse of EAOs, and the DTI, National Treasury and the Department of Justice had set up a task team to deal with the problem. “We can’t just close loopholes in the act without also looking at the National Credit Act and other sources of possible loopholes. We have to address problems in a joint manner,” she said. National Treasury’s Ismail Momomiat said: “We need to change the legal system so that it doesn’t favour reckless lending.” The LAC alleges that using clerks of magistrate’s courts to authorise EAOs without sufficient scrutiny of the underlying documents and using courts far from where the consumer works or lives have deprived indebted consumers of their constitutional rights, including access to justice. “Various ministers have raised concerns, and there have been lots of initiatives, but apart from some agonised tweaking of the National Credit Act, nothing happens,” said an LAC adviser. Unsecured lending continues to thrive with the latest figures from the National Credit Regulator (NCR) revealing that the number of credit active consumers has risen to 22.1 million. Almost 10million of these consumers have impaired records (and 2.5 million of them have judgments and administration orders against them). The 13 credit providers that are respondents in the case are Mavava Trading 279, Onecor, Amplisol, Triple Advanced Investments 40, Bridge Debt, Las Manos Investments 174, Polkadots Properties 172, Money Box Investments 232, Maravadi Credit Solutions, Icom, Villa des Roses 168, Money Box Investments 251 and Triple Advanced Investments 99. Flemix & Associates, a firm of attorneys previously known as Coombe & Associates, is also cited as a respondent. Werksmans is acting for all 14 respondents. Louis de Beer of Werksmans said on Friday that it was too early to comment. “We have filed our intention to oppose the action and now I’m busy consulting with my clients.” Johann Pieterse, company secretary at the JD Group, refused to respond to questions, saying: “Why should I speak to you?” That was his reply to questions about Maravedi Credit Solutions, which was wholly owned by the JD Group until January. • This article was first published in Sunday Times: Business Times
Posted on: Mon, 13 Oct 2014 15:29:27 +0000
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