N Maseko-Jele

A new report by the Stellenbosch University (SU) Law Clinic reveals unscrupulous lenders use a bag of tricks to side-step the legal requirements of the garnishee order system, which limits the amount that can be deducted from an employee’s salary to a maximum of 25%.

We also share the view that urgent intervention is needed to stop loan sharks from having up to 75% of vulnerable people’s wages deducted. While these unscrupulous lenders continue to fleece vulnerable debtors, consumers have no money to buy food. It is stated that while garnishee orders remained a lucrative and secure collection instrument, it is difficult to issue them, so creditors tend to use alternative methods to keep expanding their lucrative business enterprises by extending reckless loans while continuing to reap the benefits of wage garnishment. Vulnerable people are lured into debt traps they cannot escape as outstanding loans are simply incorporated into new loans.

The findings and recommendations of the report have already been shared with the National Credit Regulator, the credit ombud and the department of trade, industry and competition. As lawmakers, we will need to develop legislation to protect vulnerable debtors against payroll deductions and unscrupulous lenders.