Leaving offers no escape from debt

Greg Aris

• Last Updated: May 29. 2008 9:06PM UAE / May 29. 2008 5:06PM GMT

“The moment you run from a debt here you’ve got a criminal case against you,” says Calum McClure, a Dubai-based debt collector.

If you ever come back to the country, he warns, “You’ll be arrested at the airport, because your details are filed; there’s a criminal complaint lodged at the police station, which is sent to immigration, and you’re blocked.

“That’s a lifelong block. If you want to come back, it’s a flight from hell. You’re coming here wondering, will they, or won’t they?

“More often than not, they will.”

Mr McClure’s company Delco, based in Deira, is one of a handful of debt-collection agencies in the UAE. It chases debts on behalf of the Government, five-star hotels, oil and gas companies and nearly all the country’s banks whose customers have skipped the country owing anything from Dh25,000 to Dh500,000 (US$6,800 to $136,000).

Some people may think that leaving the country with an outstanding credit card bill or personal loan is a calculated risk, but Mr McClure warns against it.

“The problem is that it may not be this year, or the next year or even the year after that, but eventually somebody will find you and then you’ve got a bill with interest, plus interest, plus compound interest, following you around.

“It’s a very, very small world. I can’t guarantee, but I can suggest it will catch up with you eventually.”

And time will not be on your side. It does not matter how many years pass after a debtor leaves the country, says Mr McClure.

“The bank may or may not pursue it themselves. If not they then outsource it and give it to me or someone in the debt-recovery field.

“If, for example, you’re in the UK and you owe money here, I can go to the county court, get a court order and a bailiff and I’ll have your house. The law will allow me to do that.

“You’re sitting pretty back home thinking ‘I’ve just paid the mortgage off, and this house belongs to me’. Well, it doesn’t belong to you, it’s somebody else’s money that’s purchased it.”

According to the central bank, the average expatriate’s debt is Dh100,000. Easily accessible personal loans are partly responsible for a staggering 81 per cent year-on-year increase in personal debt – loans worth Dh530 billion were issued in 2007 and consumer loans rose close to 47 per cent in the year to March, doubling in the past four years.

One telling statistic is that about 30 per cent of prisoners in Dubai’s jails are there for defaulting on loans.

Banks offer loans up to 28 times a person’s salary and most credit cards charge 33 per cent interest.

Banks, says Mr McClure, are partly responsible for the situation.

“They give to people who more often than not have no collateral. They have generated their own bed, now they are lying on it.

“How can they not see when they look at the application forms what a customer earns and how can they then allow him to borrow hundreds of thousands of dirhams?”

There is, he says, “not a snowball’s chance in hell customers can pay that back. But there’s so much competition”.

Standard Chartered said defaults on loans and credit cards by customers leaving the country were not a serious financial problem for it and increased competition helped keep lending rates low.

Chris de Bruin, the head of consumer banking at Standard Chartered in the UAE, said: “In incidences when this does happen, the bank does follow up – aided by our strong international presence in Asia, Africa and the Middle East.

“In the majority of cases, customers do pay off their debts. A large number of customers in the UAE do realise that having a good credit rating with the bank here will allow for good, repayable credit lines in the other markets we operate in.”

There is no solid data on the amount of defaulted loans, or how much they cost the banking industry – and the economy – every year.

As a result, until banks tighten their own rules on credit, unpaid debt will continue to spiral in the UAE, meaning more business for debt collectors.

“I’m extremely busy, I don’t advertise because then I would be bombarded with calls and would end up letting my clients down,” Mr McClure says.

“There’s enough debt out there at the moment. This week, one of the banks sent over 80 customer files, all with unpaid debt. I’ve got Dh100 million in debt on my desk, and that’s not counting debt in US dollars, Swedish kronas or English pounds.”

No matter how careful someone thinks they have been, he warns, there are many ways to locate a person who owes money in the UAE or is running away from debt in their home country.

“No one’s that clever. If you’ve left a trail over here and left, or dirtied your nest at home and came over here, it’s only a matter of time.”

garis@thenational.ae