Tenants can claim the full security cheque if they follow the certain guidelines in the UAE. Image Credit: Gulf News/archive

Dubai: Some UAE banks are flagrantly violating rules that prohibit them from taking blank cheques from customers who apply for personal loans or credit cards, XPRESS has learnt.

The UAE Central Bank last year issued wide-ranging regulations aimed at curbing loose lending practices and bank charges.

Specifically, Article 15, Section B of UAE Central Bank regulations No.29/2011, states that: “Banks and finance companies are prohibited from taking blank cheques for granting loans or overdraft facilities, or for issuing credit cards.”

The regulations took effect in May 2011.  Of the 10 banks asked by XPRESS earlier this week, specifically on the question of whether or not blank security cheques are required to get a personal loan or a credit card, only one bank said they will “give it a pass”.

Bad practice

Another bank asked for the “context” of the story, without giving a reply. The rest declined to give a statement. XPRESS, however, learnt that several banks still demand blank security cheques from clueless customers.

One loan agent told XPRESS: “We do ask our clients to give us a signed blank cheque as part of the personal loan application process. Ten out of 10 customers applying for a loan give bank cheques only.”

It’s not clear what penalties would be slapped on offending banks. No comments were available from the UAE Central Bank, but it does have an online site where suggestions and complaints can be lodged:  http://www.centralbank.ae/en/index.php

Another loan agent for an international bank told XPRESS: “Our customers trust us and know that only the approved loan amount will be written on the cheque. It’s no big deal.”
A lawyer, however, said it’s a big deal when a security cheque bounces. Amer Syed Al Marzouqi, a Dubai-based criminal lawyer, said while banks asking for blank cheques from customers may be breaking the law, this is hard to prove.

“The most that offending banks would get is a fine and/or a warning,” said Al Marzouqi. “Suing a bank for violating this regulation would be the last thing a borrower would do when he’s already facing financial difficulty.”

“When a borrower gives a blank cheque, the lender can write the outstanding amount when the borrower fails to meet his obligations for whatever reason — it then becomes a bounced-cheque case. A lot of people are in jail for this reason alone,” the lawyer said.

“Even if a blank cheque was issued in violation of the Central Bank rules, this will not eliminate or diminish the criminal liability once a cheque bounces and is presented to a judge,” he said. “So never sign and give away a blank cheque. It’s big trouble.”