Dubai: If you miss your credit card or loan payment in the UAE, not only do you risk receiving uncomfortable calls from collection agents, you may also be looking at a criminal and civil case filed by your bank or financial institution.
But how does a bank approach the case of payment defaults and after how many missed payments does a case get filed? Here is all you need to know.
When does the bank file a case?
“Whether it is regarding loans or credit card payments, the general practice is that banks file a case after three installments are missed. However, it is important to check the signed agreement with the bank, as that would contain the details of the terms and conditions,” Jihenne Arfaoui, a Dubai-based legal adviser, told Gulf News.
She added that banks follow a step-by-step approach when a customer fails to make the necessary payment for an installment.
The general practice is that banks file a case after three installments are missed.
“Banks or credit card companies first send a written notice asking for the amount and then they send a legal notice through a notary, after which they can file a police case as well as a civil case,” she said.
This involves the customer’s file being moved first to the collections department of the bank, which tries to contact the customer and try to retrieve the dues. If the payment is still not made, the file then moves to the legal department, which begins the legal procedure, according to Arfaoui.
“Usually, there is a cheque that is provided as a guarantee by the customer at the time of signing up for the loan or credit card. The bank submits the cheque to recover the amount due to them. In case the customer does not have sufficient funds to honour the cheque, a criminal case is filed. The police will contact the person and call them to the police station, where he or she has to pay the fine corresponding with the amount on the cheque,” Arfaoui said.
Bounced cheques worth Dh50,000 to Dh100,000: Dh5,000
Bounced cheques worth Dh100,000 to Dh200,000: Dh10,000
“After this payment, the bank can also file a civil case, to get a fixed outstanding amount, which is due. They submit the necessary documents like a return memo, which provides details of the returned cheque, the reason of return and an explanation from the bank. In 2022, when the new bounced cheque law comes into effect, the bank will be able to take the dishonoured cheque to the executive judge directly, for the due payment to be made,” Arfaoui added.
Can I be stopped at the airport if I have missed a credit card payment?
Hari Wadhwana, Associate at Dubai-based law firm OGH Legal, spoke about when a missed payment might affect your ability to travel.
“Travelling out of the UAE and missing any installment payment to a bank or financial institution have no correlation, whatsoever. It is when the bank files a legal case against the person, that travelling gets affected. It is customary for the bank or financial institution to wait for three defaulted payments before filing any legal case,” Wadhwana said.
He added that once the bank “enforces the security” – that is, presents the security cheque against the outstanding financial liability – in case the cheque bounces, a police case is filed. Once the police case is filed, a travel ban is applied.
Travelling out of the UAE and missing any installment payment to a bank or financial institution have no correlation, whatsoever. It is when the bank files a legal case against the person, that travelling gets affected.
“That is when the person cannot travel out of the UAE and the immigration authority will instruct the person to either visit the police station or resolve the case with the bank. The person can choose to resolve the case by abiding by the penalty for bounced cheques or settle the debt with the bank, in which case the bank would withdraw the said police case. Once the police case is resolved or withdrawn, the person can travel out of the UAE,” he added.
I’m about to travel but have missed a loan payment. How do I make sure that I won’t be stopped at the airport?
According to Wadhwana, while it is always advisable to first ensure that you have not defaulted on any payments, if you do find yourself in such a situation, first confirm with your bank that the security cheque has not been submitted.
“You can also check with any police station or airport immigration office if there is a travel ban against you,” Wadhwana said.
He also provided a checklist to follow if you are in doubt before you travel:
1. Check bank statements for any cheque presented by the bank or financial institution.
2. If the cheque is presented and dishonoured, get a confirmation from the bank that they have not filed any criminal case. Settle the dues as soon as you can.
3. Visit a police station or airport immigration to verify if there is any police case and related travel ban against you.
4. If there are any delays in the payment of installment, keep your bank relationship manager informed. Also, apprise him or her of any change in your payment plans.