Low- and middle-income consumers are increasingly feeling the brunt of collection attorneys who are overcharging and abusing the garnishee order deduction mechanism.
According to Clark Gardner, CEO of Summit Financial Wellbeing, at least R3bn is being stolen from employees through garnishee deduction orders.
Summit has a garnishee audit business that audits and challenges unscrupulous behaviour of lenders and collectors.
"What we have identified on all lenders and collectors would scare each and every bank.
"The collectors are becoming more aggressive and less concerned about recourse as there are few entities challenging their unscrupulous behaviour.
"Currently we have 30 cases pending at court and many more to come," Gardner said on Monday.
"With over 3 million garnishee deductions and over R1 000 being over deducted per order in our portfolio, we can see that at least R3bn is being stolen from employees through this collection mechanism."
Gardner listed three matters "out of hundreds relating to over-deductions on garnishee orders" that Summit Financial Wellbeing had to fight this month.
Fin24 is in possession of documents that show how attorneys add excessive amounts in sheriff's fees (in one case up to R68 000) and legal fees (R64 000) on an emolument attachment order, commonly known as a garnishee order.
"The sheriff's fees would usually be a mere R250. There is no justification for charging these fees outside of stealing or gross negligence," said Gardner.
Garnishee orders are one of two options for judgment creditors to collect amounts that are in default.
The other option is to obtain a warrant of execution against the borrower, which results in the sale of parts of the borrower's estate until the debt has been repaid.
A garnishee order is made through section 65J of the Magistrates Court Act, and is defined as an order issued by the court whereby a judgment creditor can collect the outstanding debt - plus the costs of obtaining the order and collecting the money - from a person's employer.
The system relies on the collector to inform the employer when the debt is paid up.
"Unfortunately this relies much on honesty which is occurring less and less frequently.
"The court allows collectors to add legal and collection fees without stipulating the total amount repayable. This is a source of great abuse."
Gardner confirmed that currently Summit has more orders that are overcharging than those that are not.
"The primary source of over-deductions lies with the attorneys and collectors.
"They are adding fees in direct breach of Section 101 of the National Credit Act, Rule 81 of the Law Society, Section 65J(10) & (6) of the Magistrates Court Act or they merely continue to deduct without even trying to load inflated fees," said Gardner.
However great this abuse, that is not the biggest concern, according to Gardner.
"Worse even is the number of collectors who have garnishee orders that are not valid.
"Some collectors fraudulently stamp and add case numbers in their offices. Somehow they get these to the sheriff for delivery to the employer.
"This is a great concern."
Gardner said the system is weak in that it protects the collector, and any recourse from the consumer requires court action which the ordinary consumer does not understand and cannot afford.
"The system needs change - and sooner rather than later," Gardner said.