Know your legal rights if a ‘debt collection agency’ calls you.
Question: I was a UAE resident for 12 years and returned to India in June 2020 after I lost my job. I had two credit cards, with an outstanding amount of Dh22,000. I could not settle the amount before I flew back in a repatriation flight from Dubai due to my financial situation. A representative from one of the banks called me, asking me to pay the amount. He claims that he is a private debt collector appointed by the bank. What can I do to protect myself legally? I am willing to pay the amount in instalments.
Answer: Pursuant to your query, it is assumed that you were a resident of Dubai and had availed credit card facilities from banks which are based in the emirate (the ‘Bank’). It is also assumed that the Bank had collected security cheque(s) from you against the limit of the credit cards facilities.
Failing to pay three consecutive instalments or six non-consecutive ones may be considered as an event of default.
This is in accordance with Article 4(4) of the Personal Loan Agreement format appended to Notice No. (3692/2012) of the Central Bank of the UAE, which states: “The loan elapses and all the instalments, interests and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the bank according to this agreement or in accordance with the law – in the event that the borrower failed to pay three consecutive instalments or six non-consecutive instalments of the monthly instalments without approval of the bank.”
Therefore, in case of a default, the Bank may choose to deposit your security cheque(s) for collection. Should the said security cheques be dishonoured due to insufficiency of funds in your bank account, the Bank may file a criminal complaint against you. Dishonour of a cheque in the UAE is considered a criminal offence pursuant to Article 401 of Federal Law No. (3) of 1987 on issuance of Penal Code of UAE (the Penal Law of UAE).
Upon the filing of a criminal complaint, a travel ban may be imposed against you and you may be detained when you re-enter the UAE.
However, if the amount of your security cheque is less than Dh200,000, the punishment may be a penalty, which may vary between Dh2,000 and Dh10,000, depending on the cheque amount.
Upon the payment of this penalty, a travel ban imposed on you may be lifted. Additionally, the Bank may file a civil case against you, based on the personal loan agreement you signed, to recover the outstanding debt on the credit cards. If you are outside the UAE, they may file an application before the court to detain you when you re-enter the UAE.
Further, banks in the UAE may hire a private debt collection agency to follow up with the customers who have defaulted on their personal loan or credit card payments. Based on the instructions of the banks, the private debt collection agency may contact defaulting customers.
However, contacting the defaulting customers and threatening them or forcing them to repay the loan may be illegal on part of the private debt collection agency. Threatening is a criminal offence in the UAE pursuant to Article 353 of the Penal Law of UAE, which states: “Whoever threatens another by words, acts or signs, in writing or verbally or through another person and in instances other than those stated in the two preceding articles, shall be sentenced to detention for a term not exceeding one year or to a fine not in excess of ten thousand dirham.”
Based on the aforementioned provision of law, you may file a police complaint against the private debt collection agency in Dubai if the said agency is operating in UAE. Should it be based in India, you may approach the relevant police station.
Should the Bank agree, it is advised to obtain an assurance well in advance that it will issue a ‘No Due Certificate’ once the outstanding amount has been repaid. It is recommended that you consult a legal practitioner in the UAE to obtain further professional advice.