UAE | Crime

Credit check: Debt sentence

You could be signing your own prison sentence if you sign a cheque you can't honour. And if you think you could be out of prison after serving the jail term you are living in a fool's paradise. Read on...

  • By Jay B. Hilotin, Chief Reporter
  • Published: 00:00 January 26, 2012

A dud cheque entails a minimum of one month in jail to a maximum of three years
  • Image Credit: Supplied
  • A dud cheque entails a minimum of one month in jail to a maximum of three years.
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DUBAI: Expatriates and Emiratis who are jailed for issuing dud cheques may continue to languish in jail even after completing the prison term - that is, until the debt is cleared, lawyers told XPRESS.

There is this mistaken notion held by many that a debtor is freed from his financial liabilities after doing time in jail. The reality is far from it.

Ahmad Abdullah, a 48-year-old Emirati, was jailed last year after his general trading business went under and cheques worth several hundred thousands of dirhams he signed bounced. He does not know when he will walk a free man.

"The problem is after my first cheque bounced, I was jailed for it and I've been unable to do anything about my situation," said the father of six from Al Aweer Central Jail. "So, the other cheques I issued also bounced. It became a domino."

Rushdie, a Filipino jailed since 2008 for his inability to pay Dh74,000 in personal loans, said he also does not know when freedom day will come.

A dud cheque entails a minimum of one month in jail to a maximum of three years. But Ali, a 50-plus Arab, has been in jail for nine years after being convicted in 2003 in a financial case.

"UAE law deems it a crime when a cheque is returned due to insufficient funds," said Jafar Al Touq, a lawyer practising in the UAE for 26 years. "Those who think that sitting in jail without paying a loan is a temporary, short-term way out of debt are absolutely wrong. Otherwise, I will also do the same thing - borrow, then stay in jail for a while and keep the money."

The process in a bounced cheque goes roughly like this: a customer defaults on a loan or credit card payment, the bank recovery team hounds him and submits his security deposit cheque (which will bounce). The lender then files a criminal case for the bounced cheque and the defaulter gets jail time.

Though a subsequent civil case may not necessarily mean the defaulter stays in jail forever, Al Touq said: "He [the borrower] will stay in jail longer [than the original jail term]. It's the system's way of putting pressure on the defaulter. If there's reason to believe fraud has been committed then the judge will put him behind bars longer."


But some end up serving long jail terms due to ignorance.

The case of Yousuf, a 28-year-old European sentenced to nine years in Dubai, is a classic example of how Article 401 of the UAE Penal Code is applied.

Yousuf earned Dh30,000 a month as an accountant for a real estate firm and signed cheques as part of his job.

Several parties sued his company after it went bust; one complainant alone demanded Dh5 million back. In February 2011, the Court of Cassation affirmed the lower courts' decision giving him three years for each of three bounced cheques worth millions. Yousuf's day in court involved the judge asking whether he had signed the cheques that bounced - Yousuf admitted they were his signatures.

"We argued that he signed cheques as part of his job," said his lawyer, Emirati Amer Syed Al Marzouqi. "The problem is that you have this law [that criminalises bounced cheques]."

Article 401 states that bouncing cheques is punishable by confinement of one month to three years or a fine of a minimum of Dh1,000 to any individual who, in bad faith, writes a cheque with insufficient funds.

Some legal professionals argue that it's harsh and archaic.

However, the UAE has now drafted a new insolvency law which aims to address some of these issues.

Mazen Boustani, finance and banking law expert for Habib Al Mulla and Co, said: "The UAE has a comprehensive insolvency law. The main challenge concerns security asked by creditors, and post-dated cheques, if not honoured, constitute a crime with a jail sentence. This results in creditors - instead of having recourse to normal insolvency procedures - resorting to a speedier process, that of filing a criminal complaint for a dishonoured cheque."

In Yousuf's case, it is unclear whether the complainants will file a subsequent civil case that would keep him in jail longer.

But this happened to Angelito, a 49-year-old Filipino logistics executive, who served two prison terms - one in 2001 and the other in 2010 - over the same bounced cheque. When Angelito's Dh75,000 cheque bounced in 2001, he was sent to jail for six months. He thought his liabilities had disappeared and he went back home to Manila. Nine years later, when he flew back to Dubai to try his luck once more, he was arrested upon arrival due to a civil case filed by the creditor. He spent more time in jail. "I did not know I could be jailed again for the same thing," said Angelito.

Col Adel Al Suwaidi, Director of Education and Training at Al Aweer Central Jail, said there's not much recourse for someone jailed over a bounced cheque except for the amount owed to be paid.

Other offenders - with the exception of murderers - may get their sentence commuted if they memorise parts or the whole of the Quran. But this, he said, does not apply to someone jailed for a bounced cheque. "The commutation of a jail sentence only applies if the offence is committed against the state, except murder. In a bounced-cheque case, a person is free the minute the amount owed is paid."

Jailed debtors can only hope for a debt write-off, a government bail-out or a Good Samaritan.

Al Marzouqi said a write-off is rare. "It never happens, especially after the defaulter has been arrested. Most banks demand the full amount from the jailed borrower."

Latifa Khadem, head of the Humanitarian Services Section at Al Aweer Central Jail, said: "There's not a day without one of our inmates asking for financial help. We welcome any financial aid from generous people to help the inmates who are unable to pay their loans."

Last year, the UAE government announced a Dh10 billion fund to help Emiratis who cannot repay their debts — to settle their personal loans through a process overseen by the UAE Central Bank.


XPRESS posed specific questions - about the criteria for filing a post-jail civil case against a defaulter - to numerous banks. Most declined to comment.

A bank official told XPRESS: "It's a police matter."

An out-of-court settlement system implemented by Dubai Police last year has been fairly successful. It gives debtors a one-month grace period to clear bounced cheques. It led to a huge drop in bounced cheque cases. Among Emiratis, the numbers dropped to 3,760 in 2011 (January-September) from 5,623 in 2010. No data is available for expatriates.

A local bank official explained it's their legal department's call on whether or not to lodge a civil case against the jailed borrower. "It depends on the amount owed," said the official, who asked not to be named. "If it's a huge amount, a civil case will be filed," he said without elaborating.

Al Touq said, however: "If the person [defaulter] has no money, jail is not useful... it's damaging to all parties."



Article 401 of the UAE Penal Code:

Any individual who writes a cheque with insufficient funds - causing the same to bounce - can face imprisonment of one month to three years, or a fine of a minimum of Dh1,000.

Ways to avoid longer jail term over bounced cheques
  • Sell property or borrow from family/friends
  • Wait for a Good Samaritan to bail you out
  • Talk to creditor to reschedule loan payments
  • Look for gainful employment offer to pay the creditor in instalments


Comments (12)

Have you been in trouble over a bounced cheque? Tell us your experience.
Do you think decriminalising bounced cheques will help?
  1. Added 08:39 January 29, 2012

    I'm also victim of bounced cheque. The difference here is that the cheque belongs to someone else whose name is similar to my name! I was stopped by Sharjah Immigration on December 18, 2011. When I was travelling along with my family, and was alleged that I had issued bad cheque(s) and hence I couldn't travel. Later I was handed over to Dubai Police (CID). Only on Dec 20, 2011, (around midday) a CID officer told me that I issued a bad cheque for Dh277,000 and for which I had been serve five months in prison. The officer showed me copy of the cheque. I confirmed that the cheque was not mine and the signature on the cheque was certainly not my signature. When requested, the above officer showed me the passport copy of the accused from the case file. I also confirmed that it was not my passport copy and I showed him my Passport, in original, as a valid proof of my claim. Even after my innocence was proved, as explained above, I was taken to Al Aweer Jail on December 20, 2011, (afternoon) and on December 21, 2011, the jail authorities ‘shaved my head’. Finally, I was released on Dec 21, 2011, evening (around 6.30pm). I was detained for almost 69 hours (say three days) without any fault of mine. The incident that occurred to me was shocking and the trauma that I had during those three days of detention was really unfortunate. I already suffered a lot for no mistake of mine and the consequential financial losses occurred to me was huge as well as loss of my reputation, value of the same if assessed may run in to millions of dirhams. This also destroyed my business as well as my social and personal life.

    George Thomas, Sharjah, United Arab Emirates

  2. Added 17:22 January 27, 2012

    I was working with a prominent bank in the UAE, until last year when I had moved out of the country. Being part of the recoveries department was the most horrifying job to put to task, considering that the world had been in a financial turmoil since 2008. Calling up genuine people, with the intention to pay and harassing them and their family members over the phone, was the sole practice being carried out. It's heart-breaking to hear out situations where aged people are nothing but helpless and cannot pay off their debts due to natural constrains and as the saga of wrong practices go on, the bank does not pay heed and would file a case against them. It's high time that the UAE government carry out certain regulations, considering that the nationals are being boosted and backed well by the nation.

    Vish, Dubai, United Arab Emirates

  3. Added 22:32 January 26, 2012

    It's time for government to look upon the issue. It's the bank that lures people to take credit cards and loans. If there is a default, it could be because of humanitarian grounds. The government laws should be flexible for defaulters. Banks can put travel ban and offer interest waiver with a grace period untill the defaulter finds a job. For defaulters who are in jail, the government should give them a chance to go out of jail and find a job.

    Mutuza, Riyadh, Saudi Arabia

  4. Added 19:24 January 26, 2012

    I have had two police cases last month and my passport is already in police custody. I’ve been working in the UAE since 1997 and started using credit cards in 2005. Till 2009, I was regular with all my bank liability payments. Then, in 2009, during recession, our company closed down. Luckily, I got a job immediately but with a lesser salary (20 per cent less than my usual earnings) but I still grabbed it with a promise from my employer that I will get yearly increment and bonus, which never happened. At the start of 2011, my father back home was hospitalised due to diabetes and diagnosed with congested heart failure. Since then, half of my salary has gone towards his treatment, which is my priority as I am the only ‘child’ and my mother is not more. It was then that I started becoming a defaulter. Right now, I’m in a very bad situation as I have police cases with RAKBANK and Mashreq Bank. I highly appreciate RAKBANK for giving me an opportunity to clear the amount through an 18-month settlement plan that I can afford. But honestly, the other banks are not that great. Mashreq Bank has given me three-options to settle my case and none of them can really help my situation. I might have another police case soon for the other cards and honestly, this is a mental torture for me everyday. I can’t find ways to solve my problem and I’m really thinking about my family back home. I tried to apply for a loan to somehow settle my liabilities, but unfortunately my company is not listed in all banks. So, I am here the same way as other expatriates -- begging for help and support from the higher authority in the UAE to help me settle my liabilities. I shall pay off the Government from my salary. There was a plan of a government development bank. I hope this may help defaulters in the UAE who still want to work in Dubai....

    Divine, Dubai, United Arab Emirates

  5. Added 11:29 January 26, 2012

    I have been in jail for two months due to similar situations. I didn’t receive my salary for five months after which I lost my job right after a case from the FGB. While in jail, I just can’t do anything. I can’t find a way to solve my financial problem. I am a single mother and I don’t know how to survive the high cost of living in Dubai and support my daughter back in the Philippines. The problem becomes bigger everyday. Being inside the jail doesn't help at all. I am in a state of emotional, physical and financial breakdown. If it wasn’t my faith in God, I may have ended my life due to depression and frustration. Talking to the bank and collection agencies just don’t help. They harass you more and the worst is they start pestering your family back home by calling and telling them how bad my situation is. This has even led to my father’s heart attack. I admit I owe the bank the money and am not running away from my responsibility. Nor am I hiding from anyone. I am willing to repay whatever I owe them, but how can I find a new job to help me clear my dues if the cases are on and I can’t even apply for a new visa? There has to be some support from the government. We have contributed much for the improvement of this nation… so… can we get some help? To God be the glory!

    Aishie, Dubai, United Arab Emirates

  6. Added 10:44 January 26, 2012

    I’ve already served my sentence in jail for two months for my Mashreq bank credit card default case, amounting to Dh6,000 and also for my car rental case last 2010. I want to return back to Dubai this year. Will there be any problem in the immigration if I come back?

    July, Manila, Philippines

  7. Added 10:38 January 26, 2012

    I hope that the project of our beloved President Khalifa would be extended also for the expatriates ...clearing all debts, while the amounts could be deducted from our monthly salaries. Otherwise, how can we continue working here with threats around us and the problem of renewing our visas? There are lots of expatriates who still want to come back here but are afraid that the police may catch them. That’s why they just flee to their countries. I pray that the UAE president looks into this matter. Thanks and God bless.

    Expat, Abu Dhabi, UAE, United Arab Emirates

  8. Added 10:33 January 26, 2012

    In all fairness to the lender, reporting a bounced cheque is way to go. But, is it the way to go? A jail term where the defaulter has no means to settle the debt is fruitless. I believe it would help both parties if a mutual settlement agreement is reached and the borrower is given considerable time to make repayments. However, to protect the lender, the authorities may be approached to impose a travel ban on the borrower.

    Lorraine Partridge, Dubai, United Arab Emirates

  9. Added 10:20 January 26, 2012

    I was at the Central Prison for over three years for writing cheques that unfortunately bounced. The total value was over Dh3 million. In 2008-2009, the sentences were very harsh, especially in cases where cheques were written to private parties. In March 2011, the government started the process of fines (a good move) but only for bank cheques. For private cheques, the sentences started to reduce (a good move too). Now I have a civil case against me, for which I paid bond money and got bail. The judge gave me only a month to settle my dues (how surprising). I already served a criminal sentence of over three years and now how ma I supposed to get a job and clear my dues in a month’s time? The judge has a major role to play as the mediator in such cases. It might help if he intervenes and help me get back to the society rather than being branded as a criminal. I have lived in this country for over 30 years, never in my life have I defaulted any payments. These cases are a result of recession – I lost my business and started incurring huge loses. If I was a criminal, I would have not stayed in this country nor would I have invested my life’s savings in this nation. I will pay the creditors, but who will repay my losses?

    test, dubai, United Arab Emirates

  10. Added 09:58 January 26, 2012

    I used a credit card more than six years without any default. Due to salary cut, I requested my bank to make the outstanding amount a loan with interest. However, the bank rejected all settlement plans and filed a case. I got one month in jail. I learnt that if you default any payment, even if you are a long-time honest customer, the bank doesn’t bother. Bounced cheques should be only civil cases. We can then at least beg the court to convert the outstanding amount into monthly instalment and clear the dues. Don’t take any credit card or loan from any bank because bank are mostly uncooperative. We cannot predict our future and banks may levy huge charges without asking you if you stop any payment and for sure you will then land in jail as your bank may use your security cheque. If anyone wants to test things, please pay off the loan amount and ask the bank to return your security cheque, which interestingly they never return. What’s worse, court never ask the reason why banks keep the cheque. We are merely asked whether we gave cheques or not.

    nazeer, sharjah, United Arab Emirates

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