Victory for consumers as court rules against illegally obtained emolument attachment order deductions
The Department of Trade and Industry (the dti) notes and welcomes the judgment handed down in the Western Cape High Court through Judge Siraj Desai declaring deductions taken from employees' salaries for Emolument Attachment Orders (EAOs) illegal and invalid.
the dti also notes the order granted in paragraph 4 of page 30 of the judgment and the National Credit Regulator (NCR) and the dti will work together to ensure that necessary steps are taken to alert debtors as to their rights in terms of the judgment.
The Inter-Governmental Working Committee consisting of the dti, Department of Justice and Correctional Services (DOJ) and the National Treasury (NT) will continue to monitor the developments in this area as mandated by the Cabinet decision of 2013.
The ruling also paves a clearer way for the NCR 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 (Act 34 of 2005). 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.
The intention of the National Credit Act (NCA) 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 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. This will ensure that whatever decision is made leading to a deduction of any monies from a consumer must take into account affordability by the consumer or debtor.
the dti is grateful that this decision comes at the time when the DOJ is at the advanced stage of amending the Magistrate Court Act to be in line with the NCA and the dti is working with the DOJ, 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.
Further, the Minister of Trade and Industry, Dr Rob Davies will soon publish the regulations relating to the capping of credit life insurance after the consultation process with the Minister of Finance 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.
In this regard the dti notes the announcement by the NCR that it has referred a company (Lewis) to the National Consumer Tribunal for, inter alia, 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.
the dti will continue to coordinate its work with DOJ and National Treasury, and other relevant government departments and agencies to assist consumers to access protection that is entailed in the National Credit Act and the Consumer Protection Act.
Enquiries
Sidwell Medupe
Tel: 012 394 1650
Cell: 079 492 1774
E-mail: MSMedupe@thedti.gov.za
