MASERU — The government this week resumed deducting money from civil servants’ salaries who owe moneylenders.
The resumption of the deductions is taking place in spite of a Court of Appeal judgment delivered in October last year barring such deductions.
The Court of Appeal ruled last October that the interest charged by three prominent money lending companies was illegal.
The judgment came after civil servants sued Select Management Services, Afrisure Personal Financial Advisors and B-Blue Financial Services for charging exorbitant interest rates.
The court ordered that the money lenders and civil servants should hire an independent accountant to recalculate the loan amounts.
The court said such a recalculation would show whether civil servants were still in debt or had already paid in full their debts.
The judgment said if a civil servant had overpaid their debt they would be entitled to a refund.
The deductions were suspended in December last year.
The government then asked money lenders to submit affidavits indicating if they had complied with the court judgment.
In a savingram from the office of the accountant general issued two weeks ago the government advised some departments to accept such affidavits from the money lenders so that deductions could resume.
Members of the armed forces this week received their salaries with deductions in respect of loans they had with two money lending companies without engagement of the agreed independent accountant to recalculate the loans as the judgment ordered.
The deductions were made in respect of B-Blue Financial Services and Net Loans.
Net Loans was not party to the legal dispute in which civil servants were challenging the exorbitant interest charged by the money lenders.
The government had advised all money lenders who used the government stop-order system to submit affidavits showing compliance with the Court of Appeal judgment in their businesses.
The deductions in respect of B-Blue Financial Services and Net Loans were effected after the office of the chief legal officer for the finance ministry issued a memo to the office of the accountant general two weeks ago.
The memo is dated January 6, 2010.
The memo stipulates that the affidavits from other money lenders were rejected because the companies had failed to show if they had fully complied with the judgment.
The companies whose affidavits were rejected include Mamoth Financial Services, Select Management Services, Sechaba Personal Financial Advisors Lesotho, Prosperity Financial Services, Afrisure Personal Financial Advisors and Educ-Loan (Lesotho).
Select Management Services and Afrisure Personal Financial Advisors were among the three companies whose interest rates were declared unlawful last year.
The memo says Select’s affidavit was rejected because the company had failed to engage an accountant to recalculate the loans.
It says: “The use of internal accountants without reference to engagement of an accountant agreed upon by the parties to the matter is against the spirit of paragraph 44 of the judgment, which requires the use of such accountant.
“The affidavit in our opinion does not fully meet what is prescribed in the judgment.”
The memo says B-Blue Financial Services complied with the judgment because “affidavit by Wessel Johannes Smit is very short and to the point”.
“It avers that the company has recalculated all the balances and interest of all accounts in terms of the judgment.”
The government also facilitated deductions in respect of Net Loans after the memo said the affidavit submitted on behalf of Net Loans showed compliance with the Court of Appeal judgment.
The memo agrees to the averment that Net Loans has never charged exorbitant charges.
It says: “The affidavit indicates that the company has been complying with the Money Lenders Act 1989 and has not been charging the fees that have been declared illegal by the court from when it commenced with the issuing of loans.
“By reason that the company attests that it has never engaged in the conduct that has been declared illegal, it is in full compliance with the judgment.”
The civil servants said they are not yet ready to comment on what steps they will take to challenge the deductions because they still have to consult their lawyers.
But they still maintain that the Court of Appeal judgment has not been complied with because the recalculation was not done by an accountant who has been jointly appointed by them and the money lenders.