Debt Collection Practices Under the Microscope The news that another institution is taking up the cudgels on behalf of indebted employees certainly makes for welcome reading. Business Day reports that Anglo American Platinum (Amplats) and seven of its employees launched a legal battle against salary deductions for outstanding debt. The article notes that this could have far-reaching ramifications for tens of thousands of impoverished South Africans and the way in which debt is collected. Late last year, the University of Stellenbosch’s Legal Aid Clinic took similar action on behalf of some of its workers as well as other impoverished people from the area. According to Business Day, Amplats is of the opinion that attorneys acting as administrators charge an additional fee to the prescribed 12.5% stipulated in the Magistrate’s Court Act. Amplats CEO, Chris Griffith, said debt administrators, “due to a possible lack of clarity in the statutes that govern their roles and lax regulation of their activities, exploit many of the heavily indebted people placed under their care”. “The misuse of the credit industry, and the legal regime with it, can be the cause of frustration, social unrest and a denial of fundamental rights,” he said. This was possibly a major driver in the five-month mining strike last year, culminating in the catastrophe at Marikana. It is often said that greed was the driving force behind investors who burnt their fingers by investing in schemes that imploded and left them penniless. This may be true to a certain extent, but non-disclosure of material information played at least an equal role in the inevitable collapse. Most of those who invested in suspect schemes were more literate than those caught in the debt trap. The allure of an above average return in a low interest environment was just too enticing. Add to this the centuries-old believe that property is an infallible investment, and you have a winner on your hands. The fact that they, in fact, bought unlisted shares was rarely disclosed, and probably seldom understood. Those who end up with legally enforced deductions from their wages and salaries are often people who see loans as a means of improving their standard of living. Repossessions happen around them all the time, yet they believe it will not befall them. Some of the stories about abuses by debt collectors are hair-raising. Last year, we quoted from a Business Day article in which Kruger van der Walt, director of the Stellenbosch Legal Aid Clinic, said that 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 which the applicants have no hope of approaching for relief”. Whilst there are institutions which these people can approach, most victims are probably unaware of their existence, or are simply too scared to approach them. It is heartening that employers are now taking up what it regards as malpractices, and placing these issues in the limelight. The University of Stellenbosch’s Legal Aid Clinic involved credit providers, a firm of attorneys, the Minister of Justice, the Minister of Trade and Industry, as well as the National Credit Regulator as respondents in its action. This will surely lead to proactive steps, even if their quest does not succeed on legal grounds. Credit regulation is also part of the focus of Twin Peaks, and specifically consumer education. This alone will not solve the problem. Much closer, hands-on regulation of the whole debt trap debacle is needed to ensure fair treatment of these customers, too.
Posted on: Thu, 15 Jan 2015 09:16:32 +0000
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