The United Arab Emirates' central bank said on Thursday it is confident there will be a compromise to avert a US debt default by an August 2 deadline, adding that it holds no US Treasury bonds or US financial instruments. Image Credit: Ahmed Kutty/Gulf News

Abu Dhabi: The UAE Central Bank has held that banks operating in the UAE have no right to seize the money of their clients unless they had defaulted on payment of three successive loan instalments. The regulator urged those subjected to freezing of their funds by banks for unjustifiable reasons to file complaints with it.

The statement came in reaction to a complaint by an expatriate who was dismissed from his job at a local department and found that his account had been frozen by his bank. Requesting anonymity, the aggrieved person called on the Central Bank to look into the measures initiated by the bank and to revise them for the general benefit of depositors.

S.S. said he was allowed by his employer to look for another job and given the assurance that his visa would be valid until he had found another job. He said his bank dashed all his hopes when it emptied his funds and imposed a freeze on his account.

“I had taken a personal loan from the bank worth Dh 230,000. I was regularly paying all instalments in time and never delayed the payment of any of the instalments. When I was informed by my employer that they could no longer keep me, I discovered my loan had suddenly decreased to Dh185,000. The bank froze my account and used the end-of-service settlement I had received, around Dh72,000, towards my loan,” S.S. complained.

“I had good credit record and was never late in paying. So I tried to reach a deal with the bank asking them to take only half and give me the chance to pay my rent and survive until I had found another job. The bank lifted the freeze on my account but it was empty since they insisted on taking the entire amount towards my loan,” he added.

S.S. was not the only one to land in the hopeless situation. Another resident I.S. shared his similar experience with Gulf News.

“It was Eid, so I went the night before to an ATM machine to withdraw money for Eid clothes and presents for my children. Instead, I got a written message asking me to contact the bank. I had no money and no Eid presents for my family until the bank reopened after Eid holiday,” I.S. recalled.

“The bank staff told me that they froze my account when they received my end-of-service benefits and the notification that I no longer work nor have a monthly salary. The employee said that this is a standard procedure since I had a car loan. I was really mad as I had paid most of the loan and the remaining amount was only about Dh22,000 while the gratuity was over Dh120,000. There was no need for such a drastic measure before Eid. There was not even a notification that the bank had acted that way; at least, they should’ve informed me,” she said.

I.S. called for the UAE Central Bank to look into ways to safeguard the interests of both parties and evolve a clear formula that would give bank clients every chance to meet their financial commitments as they dealt with events beyond their control.