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Debt trap in UAE: To repay or to run away?

Legal experts caution debt-ridden expats against taking the easy way out as the long arm of the law can catch up sooner than later

Image Credit: Ador T Bustamante/XPress
Recovery: Overseas debt agencies can carry out proceedings and recover money from the debtors
30 XPRESS

Dubai: If you are steeped in debt and are thinking of fleeing the UAE, think again.

As simplistic as it may seem, the long arm of the law can catch up with you sooner than later.

A jobless Indian expat who fled to his homeland after borrowing Dh150,000 from a local bank learnt this the hard way when he was arrested recently in a third country – Qatar. The bank had filed a case against him, following which Qatar courts summoned him and he was sent back to the UAE where the law took its own course.

Another Indian in Dubai, whose contracting business went bust, took the same route after he failed to honour a bank agreement. Sure enough, the bank’s debt collectors came knocking at his door in India and he was left with no choice but to reach an out-of-court settlement.

“Debt doesn’t stop at the border,” said Dubai-based lawyer Musthafa Zafeer OV of Musthafa & Almana International Lawyers and Legal Consultants who deals with such cases on a regular basis. “The UAE is a signatory to the Riyadh Convention and local UAE banks have the right to enforce a UAE judgement in other signatory countries. Even otherwise, the bank can bring new proceedings against the defaulter.”

He said in the case of Indians, potential defaulters should be aware that any offence committed by them outside their homeland is punishable by Indian law if the aggrieved party proceeds against them. “The Indian police can act against these individuals as if the offence was committed in India. So they remain legally liable.” 

No escape

There is no escaping even in countries like the UK where the debt from Dubai can be sold to an overseas debt agency which can carry out proceedings and recover money from the debtors. So it’s a matter of constantly living in fear and looking over the shoulder.

A spokesperson for MashreqBank told XPRESS most defaults happen with credit cards. “It is always important to maintain a clean and good credit history. Individuals should borrow wisely to ensure the repayment is affordable. The borrower should also ensure payment is cleared on time … Banks try to get in touch with the debtors to remind them of their obligations, which could also be in their home country.”

While no one is willing to estimate the number of debt-ridden expats who have fled the UAE, everyone agrees the numbers are big. Newspaper reports claimed that around 2,500 people a month were absconding from Dubai alone with unpaid credit card bills during the peak of recession in 2008-09.

“The maximum amounts of defaults happened during the global recession when many people lost their jobs and left the country without paying car loans, personal loans or credit card loans. This left the banks with no choice, but to seek recourse through debt collectors to get their money back,” said Dubai-based Tina Thapar of Al Midfa & Associates Advocates and Consultants.

“For some whose guarantee cheques were held with banks, the latter used them to get them bounced and then filed police complaints against defaulters under Article 401 of the Penal Code,” she said, adding this led to several arrests.

According to legal experts, debtors who flee the country mistakenly believe they can hold creditors to ransom as moving the courts can be a long and expensive procedure for creditors and may not always be worth their while.

“Moreover,” said social worker Joseph Bobby, “When such cases come to court and an in-absentia judgement is given, banks usually recover some of their losses through insurance. But what people forget is that this doesn’t absolve the defaulter and he can still be given the chase.”

Another social worker said both official and unofficial channels are employed to recover debts. “We come across many families who are constantly harassed and hounded in their home countries by unofficial agents to clear their dues. The more these agents are able to recover, the greater is the commission they get.”

One source said it is not uncommon for some debtors to strike a better deal with the agents to report them as untraceable. But that inevitably is a myopic move.

Thapar said many defaulters want to now return to the UAE. “They write to us from outside to check on their status and inform them about any cases against them or any money they owe to a bank. They want us to negotiate with the banks on their behalf to bring the matter to a closure.

“Many times, the banks agree to a certain amount to be paid in full and write off the balance. The defaulters pay the money to us and we in turn pay it to the bank and procure the release letter which we then take to the respective police station and get their arrest warrants removed. We do request for a Power of Attorney from the party prior to approaching the banks.”

You can’t run away from your debt

You could be in for a surprise if you are oblivious of your repayment schedule – like this man with a credit card loan of Dh19,000 who was freely moving in and out of the country. The bank through its debt collectors traced him, sought a travel ban based on his guarantee cheque of Dh31,000. He was arrested at the airport. He claimed the bank didn’t inform him earlier but the bank had sent him several e-mails. He then took legal help to talk to the bank and get a release order after due payment.

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Do debtors flee the country as a last resort or is it a planned move?

 

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Latest Comment

It is good to be straight-forward and not cheat anybody including the bank, who help us in our hour of need. But there are some banks who put hidden and unwanted/unfair charges on credit cards and loans and trouble honest customers.For credit cards, some banks charges monthly interest for the complete outstanding amount (without considering or reducing/ deducting the partial amount you paid prior to the due date-which means even if Dh1 is outstanding they charge you for the total due including what was paid by you). In the UAE if any customer faces such problem (Not only limited), they can complaint to the Central Bank through their website complaint channel for which the Govt. Central bank is very strict and provides justice to the people with strict action against the law-breaking banks within 14 days and resolve the issue.There are cases in India where some foreign banks appointed private firms to collect the debt , but the absconded guy offers more commission to the agents than the bank due to which the agents report back that the absconder was never found. Better is not to cheat anybody and making amicable settlements.

Joseph

10 July 2014 15:13jump to comments
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