News / South Africa

Ilse de Lange
3 minute read
9 May 2017
11:40 am

Social grant deductions allowed, court rules

Ilse de Lange

Banks are entitled to make deductions from social grants as debit orders constitute the payment of legitimate debt.

Sassa card.

Banks are entitled to make deductions from social grants as debit orders constitute the payment of legitimate debt, the High Court in Pretoria has ruled.

Acting Judge Corrie van der Westhuizen today ruled in favour of Net1 Technologies, Grindrod Bank and other institutions that amendments to social assistance regulations did not mean no debit orders could be deducted from social grants.

He said the SA Social Security Agency (SASSA) and the social development minister’s interpretation of the amended regulations was “contrived, forced and untenable”.

He ruled that the amended regulations did not restrict social grant beneficiaries in the operation of their bank accounts with Grindrod Bank or any other commercial bank.

SASSA and the department interpreted the new regulations as prohibiting all electronic debits, stop orders and electronic fund transactions from beneficiary accounts held at Grindrod and instructed Cash Paymaster Services (CPS) to stop all debit orders from being processed.

Net1, CPS and Grindrod were criminally charged when they contested SASSA and the department’s interpretation and resisted implementation of the instruction.

The practical implications of SASSA’s interpretation affect the operation of over 10 million beneficiary bank accounts and social grants totalling about R550 million per month.

The SA Reserve Bank has cautioned that the effect of SASSA’s instruction would disrupt the system of collection and payment by creditors and debtors that would result in a broader economic impact due to the unsuccessful collection of debts.

Judge Van der Westhuizen said the Grindrod bank accounts into which social grants were paid operated within the ordinary banking environment. No contractual relationship existed between SASSA and Grindrod and SASSA did not operate the bank accounts held at Grindrod.

Debit orders against accounts at Grindrod or any other bank were made after the grant was paid into the account and the processing of a debit order entailed compliance by Grindrod or any other bank with an instructed from an account holder to pay a third party, he said.

“In my view …. it is clear that once the grant is transferred into the recipient’s bank account at Grindrod, it operates as any bank account at any commercial banking institution. There is clearly no difference and SASSA equally has no control over such account with Grindrod as it does not have control over any account with a commercial bank.

“There is no merit in the submission … that the Grindrod bank accounts are not bank accounts chosen by the beneficiaries but is a method of payment chosen by the Agency.

“…The debit order levied against a recipient’s bank account is nothing other than payment of a legitimate debt.

“…Neither SASSA nor the minister … is extended regulatory powers … that would empower them to regulate and impose rules and restrictions relating to electronic payment. Such powers are deferred to the SA Reserve Bank,” he said.

* The judge dismissed a bid by the Centre for Applied Legal Studies (CALS) on behalf of the Black Sash Trust to intervene in the application to ensure the protection of social grant beneficiaries.

He said their application dealt with alleged constitutional issues and this was not the forum to consider such issues and the possible relief they sought.