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Is your bank bullying you?

uae banks lending

Kipp takes a closer look at the arm-twisting tactics banks favor and we ask is it high time for change in defaulting policies?

June 25, 2012 5:02 by

It is difficult to reconcile the relationships banks enjoy with credit here in the UAE. Why narrow in on the Emirates, you ask? After all, the global economic meltdown helped to cast a much needed light on the somewhat reckless lending habits of banks around the world. But what sets the UAE apart from the rest, is the country’s drastic legal framework set in place to protect banks from defaulters.

For instance, if you miss a payment for a personal loan, the bank can demand a payment of the entire amount lent in addition to accrued interest and late payment fees. Banks also require loan recipients to submit a ‘security cheque’ as collateral. In the event of a late payment, the bank can chose to cash in this security cheque. When this security cheque bounces you are in hot water.

As per Article 401 submitting a bounced cheque is punishable by a stint in jail lasting anywhere from a month to three years—in addition to a fine. After serving the period, the amount due has to be paid in full—failure to do so could result in more time in jail.

If harsh and outdated are the words coming into your mind, you are not alone. Professionals and experts in the field have called for a rethinking of the current system and repercussions for some time now. After all, shouldn’t the bank also be responsible for a thorough background check to assess the financial stability of the recipient of a loan? Currently the only requirement for getting a loan is a salary of Dh 8,000 and a residence visa. Rather lax criteria considering customers can get loans up to and exceeding 20 times their monthly salary. How exactly does this qualify as evaluating risks?

Or what about current policies in place concerning final salary payments? As per the current regulations a bank can freeze your account if you lose your job. Tough luck, huh? After your last salary is paid to your account, the bank has the right to freeze your account and your credit card. If you have an outstanding amount due for a personal loan, the bank also has the right to take an amount out of your current account and place it in a temporary holding account.

So, here is the question do you think UAE banks are given too much power? Surely one should exercise caution and responsibility when applying for a loan; but is the threat of a jail sentence allowing banks to abuse the system? Kipp wants to know your thoughts on the matter. Have you or anyone you know ever been a victim of such abuse? What do you think needs to change in order to have a better regulated banking system?


  1. Donal MacLochlainn on June 25, 2012 7:02 pm

    I bank with HSBC. As a customer who uses First Direct in the UK, the comparison beggars belief – its way worse than Ferrari compared to 70s Lada. I took out a personal loan to buy a car a few months after I came here. They took the security cheque but I did not realise at the time what it was for and no one told me – disgusting behaviour. When I paid the loan off, they wanted me to pay them something like 50 dirhams to return the security cheque. I told them, I would be calling the police and reporting them for extortion which upped the ante considerably. For me, the most effective way of gettng HSBC is to report their defects to the Jersey Financial Services Commission, the regulator for HSBC every time they screw up. That drives HSBC AND the Jersey regulator mad – both know they have to get off their backsides and do something when a complaint is made. And it is wildly entertaining too. Another tactic if you are a LinkedIn member is to find suitable people at HSBC in their UK HQ Press Department and copy your complaints to them and to suitable financial journalists – that also raises tensions several notches. What some might call psyops!!

  2. Mohammed Khan on June 26, 2012 4:22 pm

    Barclays Bank in Dubai sends in hardcore bullies to your home/doorstep if you do not repay their loan on time. Who told them to give erratic loans to all and sundry in the first place. Greed to make a quick buck while the going was good in the period 2006-08.

  3. Ajay Goplani on June 26, 2012 4:38 pm

    ENBD -when called on phone banking I get an offer of 3.25% being premier priority customer of almost 9 years relation along with salary transfer however upon reaching one of the branch – it changes to 3.75% with options to bring it down only if I sign on a free for life credit card (I don’t want one), over and above I get offered only 80% of car value as loan amount which was not mentioned on phone banking. This doesn’t stop here – there is 1% additional in name of fee – if you thought it is enough, there is another AED 500/- for something I can’t recall now. The sage doesn’t finish – when they mention I need to give a personal security cheque – I thought they were mortgaging the car; seems I am part of the collateral…anyone out there who can better this…good job ENBD…thanks for wasting my executive time but hey do I have a choice!

  4. chaz on June 27, 2012 6:21 am

    I have only just found out that HSBC in Dubai is HBME.
    Articles on them being downgraded brought that to the fore and it clearly explains why they are nothing like HSBC anywhere else.
    Bit like a franchise here, same as McDonalds.
    Sad huh.


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