Loan Repayments and Police cases
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Getting into debt is virtually easy in Dubai. There are 50+ banks in Dubai, competing for the business of approximately 5 million potential customers. (Not counting in companies!) For a person who is looking for a loan the choices are many or should I say, you are spoilt for choices!! When you take a loan or use your credit card, you are supposed to return the money to the bank at a future date. When you sign up to a loan or a credit card, most banks in UAE collect what is called a “Security Cheque.”
In most countries around the world, bounce cheque is a civil offence; not in UAE though! If for any reason the cheque issued by you bounces, it is a criminal offence. If you are an individual, you are supposed to pay the cheque and if you are a company, then the authorised signatories are supposed to repay the loans.
Article 401 of the UAE Penal Code says that a person who issues a check with insufficient balance bringing about the same to can face detainment of one month to three years, or a fine of at least AED 1,000. Thus, as per the UAE Penal Code, issuance of a dud check is regarded a culpable criminal act. There is no Insolvency Law in UAE as of now. However, government is taking many initiatives to launch Insovency Laws. There was a talk of new insolvency law recently. However, I do understand this will not be for individuals.
Why is cheque bounce an offence?
Detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.
Article 401 of UAE Penal Code clearly mentions that cheque bounce is a criminal offence in UAE. All things considered, as per the UAE Penal Code, issuance of a dud check is regarded a culpable criminal act. Along these lines, one would sign his own jail sentence on the off chance that he purposely or unwittingly issues a marked check, which he can’t respect. Besides, he would support a mixed up idea on the off chance that he trusts that he would be out of jail in the wake of serving the prison term for this act on his part in light of the fact that until his obligation is cleared he may keep on languishing in prison.
What happens after a cheque is bounced?
Here you ought to understand that a bank collects a security check as security for issuing a credit card or loan in order to put pressure on the borrower that if he defaults on loan repayment or credit card he may be in trouble. In this way, if a client fails to repay his loan or credit card due in the UAE, following would happen:
- If your standing order or cheque bounces, the bank’s collection agent would get in touch with you to request repayment of EMI;
- They will then deposit your security cheque to wait for the clearance for the entire amount. In most cases this may bounce;
- The bank will follow up for up to 3 months for you to repay, before reporting the issue to the police and submit a request a case against you;
- If the police accepts your case, an official report is filed. If the amount of the loan is substantial, the police would arrest you;
- When you have the criminal case against you, your immigration status is blocked and you may not be able to leave the country;
- Your visa can not be renewed or cancelled;
- If you are arrested, your case will be presented in the competent courts where a judgment will be passed, usually against you, meaning, you will be imprisoned.
What happens after your prison sentence is completed?
Even after your prison sentence is completed, you are not free! You will have to repay the loan or any money owed to the bank or the financial institute.
I have absconded from UAE. Can I work in other GCC countries?
UAE is a signatory to the Riyadh Convention and local UAE banks have the right to enforce a UAE judgement in other signatory countries. In any case, the bank can bring new proceedings against the defaulter. It is a known fact that banks do employ agencies in other countries for recovery.
What should you do to get away from bounced cheque cases?
Ideally you should do the following:
- Do not take large amount of loans than you need! I would say that, take a maximum of 5 times your salary loan which may not be a substantial amount;
- Keep a shorter tenure for your loan so that you end up paying with minimum time;
- Take a loan for productive purpose like investment in down payment for a home back in your country;
- If you think you will lose your job or have already lost your job, first thing that you should do is to inform your bank about your current financial situation. Be transparent;
- Don’t run away from your debt. Get help from your family and friends who are able to help you and repay them later. Do not jeopardise your future and future of your family.
Cheque bounce is still a criminal offence in UAE. Even if it is not a criminal offence, you must make all efforts not to default on your loans. With the introduction of Etihad Credit Bureau, every transaction is monitored and banks have access to all the information. Not only banks, your Etisalat and Utility payment information will be tracked. So make sure, you be prudent when borrowing money from the banks and finance companies. Insolvency Law is being drafted. But I am still not sure whether it will include personal liabilities.
However, do not worry, help is on the way. In October 2016, the UAE ruler Sheikh Khalifa issued royal decree for the decriminalization of the issuing of bounced checks, which has now been reached out to abroad specialists in the emirate. As per Reuters, Ali Khalfan al Dhaheri, legal head of the UAE’s Ministry of Presidential Affairs, declared that expatriate defaulters would no longer face jail terms. Al Dhaheri added that the inclusion of expats (UAE nationals were already exempt from this) had been ordered by Sheikh Khalifa in the spirit of equality and fairness. The United Arab Emirates’ legal system has no bankruptcy laws, leaving debtors unprotected from their creditors and liable to serve several years in prison if they default on loans or their cheques are not honoured by the banks.
Many UAE lawyers representing offenders have been calling for the decriminalisation of the offence. Recently, a Dubai-based British businessman serving a three-year prison sentence for bouncing cheques was released following a seven-week hunger strike which resulted in his conviction being overturned.
The relaxed stance on the offence has been confirmed in an article by the National, an Abu Dhabi daily newspaper. Head of the Justice Ministry’s judicial inspection department Judge Jassem Saif Buossaiba confirmed to reporters that federal public prosecutors in the kingdom had been instrumental in freeing convicted Emirati offenders since the law changed in October, adding that expatriate prisoners convicted of the offence were also being freed.
In any case, follow the following mantra: