The cap by the Central Bank of the UAE is in line to push more active supervision of the banking sector by adopting consumer protection measures. Image Credit: Pixabay

Dubai: UAE credit cardholders and borrowers are feeling the pinch of high financial services costs and have called on banks and financial institutions to lower their fees.

Gulf News spoke to a section of retail banking consumers who strongly felt the need for a reduction in rates, with some saying they were being unnecessarily charged on their banking transaction.

Indian expatriate Latha Padmanabhan was in shock when she went to the ATM near her house to withdraw cash from her credit card recently.

“I had used up my credit card limit and I was in urgent need of cash. I needed Dh1,000 but the bank charged me heavily on the cash withdrawal. I finally ended up with Dh200 less. I felt very cheated to be honest,” she said.

Another Indian expat, Ranesh Agarwal, decided to pre-pay his personal loan with a local bank in the UAE. “Things are getting a little tough at work and I want to keep myself free from any credit. I might just decide to leave my job in the UAE and head home. So I wanted to pre-pay my loan. But I was penalised heavily for it. The bank debited a massive charge. Of course I knew there was going to be a charge for pre-payment of loan but I just felt the pinch of it when it actually happened.”

But a financial expert said when customers ask for a product, there is a process and work involved and institutions have to charge a fee.  If the customers feel they are being levied a high fee, they should read the fine print and check if they have indeed been unfairly charged. 

TK Raman, Group Chief Financial Officer, Finance House PJSC said: “Central Bank of the UAE has come a long way in streamlining bank fees to customers on retail products. There is a 100 per cent transparency of fees within banks. If people say there are hidden charges, it is because they perhaps have not read the fine print while buying a product in the market.”

“Unfortunately they (customers) don’t take out time to read the terms and conditions laid down on the paper before buying a financial product in the market. Today, every bank, financial institution is expected to disclose all their charges. It is clearly mentioned on their websites too.”

“Unfortunately they (customers) don’t take out [the] time to read the terms and conditions laid down on the paper before buying a financial product in the market. Today, every bank or financial institution is expected to disclose all their charges. It is clearly mentioned on their websites, too.”

- TK Raman, Group Chief Financial Officer, Finance House PJSC

The UAE Central Bank, the official body regulating banks and financial institutions in the country, has set a cap on the maximum charges related to a product – whether credit card, personal, auto and home loans. And, as per regulations set by the authority, banks are also required to give full disclosure of any charges levied on all corporate and retail related products in the market.

The cap by the Central Bank of the UAE is in line with the objective to push for more active supervision in the banking sector through the adoption of consumer protection measures.

There are 23 local banks registered under the Central Bank of the UAE. The fee caps apply to 43 types of charges. All bank fees will be reviewed annually. In addition, banks need to notify and seek approval from the regulator on plans to introduce new fees or change it.

UAE Central Bank Image Credit: File photo

But how many people are aware of these charges? How many take the time out to read the fine print before signing on the paper and buying a financial product in the market today?

Valuation is a crucial step in many property transactions Image Credit: Shutterstock

On January 1, 2018, the Central Bank of the UAE capped the fees of all retail products in the market. Since the rollout of the bank fee caps, banks and finance companies have streamlined all their personal banking charges to comply with the directive.

For example, a fee limit has been set for a bank account closure at Dh100. Banks and financial institutions can charge a fee for customers pre-paying a loan which is capped at a maximum one per of the outstanding loan amount or Dh10,000.

In the case of a partial settlement with respect to a home loan, the penalty is set higher at three per cent of the loan amount. Late payment fees for credit card and home loans is Dh230 and Dh700 maximum.

Banks and financial institutions cannot levy anything more than this. In the case of a home loan – if a property buyer is swapping homes, there is a fee levied by the lending bank to the tune of a maximum Dh1,320 (including valuation costs). A copy of such charges and more set by the Central Bank of the UAE is with Gulf News. (A graphic of this is below).

Maximum limits for fees and commissions set by Central Bank of the UAE Image Credit: Supplied

“It is safe to say that there are no more hidden charges with banks anymore. The fee limits, which apply to home loans, for example, are expected to reduce cost of mortgages and make more people eligible for home finance,” said Raman.

“The new measures help curb the practice of some banks hiding large fees in their services.”

Every bank and financial institution lending customers have their charges all detailed on their website. Additionally, we regularly communicate the same with customers or if there are any additions and updates to these charges. In most cases, customers are sent an email.”

“One may ask why there is a charge in the first place. Remember, if a customer comes to close an account, there is a certain amount of time and energy spent by a bank employee to facilitate this process, hence there is a cost implication for the bank,” said Raman.

If a customer comes to close an account, there is a certain amount of time and energy spent by a bank employee to facilitate this process, hence there is a cost implication for the bank."

- TK Raman, Group Chief Financial Officer, Finance House PJSC

“Sometimes, there is a lack of awareness and the customer assumes he is being charged unnecessarily. For example, if you use your credit card in a foreign location, you may be charged an extra fee. Besides the currency conversion gain or loss, you will be charged a fee by the lending bank. But if a customer is complaining that they have been charged incorrectly, then this is not right. They just have to look at their credit card tariff and they will find a currency conversion fee,” he explained.

There is very little in today’s market to choose based on price. Convenience in terms of digital access by the lending institution and good customer service are key deciders of which institution to bank with. It is not about which bank provides a better rate anymore.