DUBAI // With hundreds in jail for bounced cheques and reports of people fleeing the country to escape their mounting debts, there have been growing calls for banks to take a gentler approach to customers struggling to make ends meet. Now it appears the banks are beginning to heed those calls, with Mashreq joining others who have launched debt counselling services. Mashreq Assist hopes to help customers struggling to meet loan obligations because of a salary cut or redundancy by restructuring their payments. The bank will also prevent its call centre from adding to the pressure by hounding out-of-work clients for payments.
The bank says up to a dozen customers a day have come in for help since a trial version of the service was launched two weeks ago. The programme will be extended to all branches from today. Similar programmes exist at other banks such as HSBC, which recently launched a free debt-counseling service, giving confidential advice about money worries. Mashreq hopes its move will prevent customers from panicking and taking drastic measures.
Niranjan Mendonca, the head of retail assets at Mashreq, said the initial response had been encouraging. The most common scenarios, he said, were customers who had been forced to take a pay cut and could no longer balance repayments with their living expenses. Other common struggles involve property investors hit by the downturn and those made redundant who were still awaiting pay-offs. "Whenever we give a loan or credit card we make sure that only 50 or 60 per cent of their income can be used to service borrowing and the rest for living expenses.
"But with the decline, that 60 per cent may become 80 per cent and that means he cannot pay his children's school fees, or Salik, or meet rental obligations." In such cases the bank will look at spreading payments over a longer period so basic needs may be met and instalments honoured. He said that if people act quickly when they get into trouble, it is easier to reorganise their obligations. An Australian expatriate, who did not wish to be named, said more should be done to prevent others going through the legal battle he is facing to release his end-of-service payment, which has been frozen in his account for several months.
Despite having no existing loans or credit cards with one bank, he claimed it had refused to release his redundancy pay-off because of a property investment he made with the bank, which is not due to be completed for three years. "Despite the fact that I am not due to make any repayments on the property for at least three years, and the fact that the bank owns it and I simply lease it back from them over the agreed time frame, they refuse to release the money," he said.