Credit Card Defaulters in UAE | Fines, Punishments, Etc

UAE offers a world-class quality of living to its residents. A dynamic city provides amenities and easy access to credit facilities for loans and credit cards. The credit card offers great ease and unmatched convenience to its users. On the other side, it has its potential challenges that must be addressed. Further, there are associated financial risks with credit cards that must be managed adequately. One of the major concerns in UAE is the increasing levels of credit card defaults in UAE. Besides, the main problem arises when individuals fail to pay off their outstanding dues regarding credit card balances. This results in serious legal implications that must be addressed. UAE law and order provides solution to every complication through law.

Credit card default refers to the point when a cardholder is unable to make the payment for an extended period. Usually, the period for it is 90 consecutive days. However, 30 days are granted to every debtor to fulfil his obligation. It is uncommon for banks to have delinquent bank accounts. Once the account is declared, this will give rise to the need for a formal recovery procedure. The bank may take certain steps to address the delinquent accounts, including freezing credit cards, late payment charges, penalties for late payment, and last but not the least, initiate legal recourse.

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As per the law in the UAE, the borrower is required to sign a blank security cheque for a credit card. The cheque becomes the most powerful tool to initiate legal action in case of default.

The credit card default could lead to criminal charges. This is not a popular trend in Western nations, but the UAE considers credit card default a serious crime, and thus, accountability is inevitable. If the cheque issued to the bank bounces due to insufficient funds.

This case creates problems; it will escalate the situation, and will further lead to a lawsuit in criminal courts.

This is a criminal offense in UAE, which can result in legal implications. It may lead to heavy fines, jail sentences, travel bans, seizure of assets or properties, frozen bank accounts, and more.

The legal implications of credit card default in UAE are severe, and thus, individuals may get into double trouble. They are already facing financial difficulties, and with legal action, the legal exposure expands further. Our legal experts can guide you to understand legal implications better. Book a legal appointment with our legal experts. Our lawyers and legal consultants are at home in Criminal Law as well as Civil Law.

Before the legal procedure is sought, the bank relies on internal collection efforts. The UAE banks will inactive the bank collection teams who can contact the customers for recovery. Banks connect to customers via phone, email, SMS, Fax, letters, and other possible ways to recover the delinquent accounts.

If the initial collection efforts fail, the bank will sought for alternative option available options. The banks will inform the client about the potential legal recourse resulting from a bounced security cheque.

After sending the warnings of legal action to the customers, the bank can opt to file a police case. For it, they will deposit the security cheque at a nearby police station. This is necessary for police investigations and thus evidence are indispensible.

According to the UAE law, the bounced security cheque is a criminal offense that can result in a police case being filed against the customer.

Police and other relevant authorities may issue a travel ban on the credit card defaulter. This halts them from exiting the UAE. In more severe cases, issue the arrest warrants be also.

Civil Case Furthermore, once the criminal case is launched, the banks will file for a civil case for recovery of outstanding debts. Civil case for debt recovery is done via the UAE court system.

There is a great impact on the credit rating of an individual. As there is financial risk involved, this has long-term implications. It has financial and legal risks associated with it. The default on credit cards will also result in legal problems for an individual.

A poor credit score is the direct outcome of it. The Al Etihad Credit Bureau is the responsible authority that maintains the records of missed payments and credit card defaults in the UAE. This makes it tougher for individuals to secure more loans, credit cards, and even rental contracts quickly. It can safely be concluded that it harms the goodwill of an individual.

Furthermore, any person who is a credit card defaulter will face problems in securing employment anywhere in the UAE.

This is more likely in the government sector and in the banking and financial sector. To work in this sector, it is essential to have clear financial records with no history of discrepancies.

UAE courts may order seizure of personal assets, a vehicle, or property. It can also lead to salary deductions to recover dues.

Some lucrative strategies are readily available to manage the credit card defaults. These steps will likely resolve the legal and financial risk related to credit card debts.

Debt Restructuring is an option available for banks. The banks that are willing to offer debt-restructuring plans will offer lower interest rates, extension in repayments, and consolidated debts into one manageable loan.

This facility is directly negotiated with the banks; the role of a skillful lawyer in the UAE is pivotal. They will assist in negotiating the favorable terms by applying the negotiation tactics. They also have a better understanding of the UAE banking regulations.

Secondly, negotiating the settlement agreements is another viable option. The banks will accept a lump sum amount lower compared to the full outstanding amount.

In this, full documentation is necessary to make it a legally binding agreement. It assists in avoiding future claims and helps in recovering credit card debts.

The Court Settlement and Payment Orders are another lucrative option available. In civil lawsuits, the UAE courts may offer a payment plan. This will allow the debtor and borrowers to repay the outstanding debt balance in installments. This settlement will help the debtor avoid the criminal charges resulting from bounced cheques.