An increasing number of banks in the UAE are using heavy-handed tactics to collect debts, even when the sums involved are as little as Dh16, customers say. Meanwhile, the banks say it is happening because the country has no real structure for collecting bad debts.
Junaid Malik thought that it happened only to those who had lost their jobs and could no longer afford to pay off debt. But earlier this month, after missing his monthly credit card payment, he received the call - a collections agent from his bank threatening him with jail if he did not immediately pay what he owed. Gainfully employed at a beverage distribution company in Dubai, Mr Malik does not fit the profile of someone who would abandon financial obligations and abscond.
Now, however, he sympathises with those who do. "If every person had to deal with a bank employee who threatens each of his customers who don't pay their debt with a jail term or an arrest warrant, I can understand why so many people are leaving the country and fleeing back to their home countries," said Mr Malik, 29, who is from the UK. While customers condemn such tactics, the banks say they are necessary because the Emirates has no institutional framework, such as a credit bureau or a bankruptcy court, for dealing with bad debts.
However, the debts need not be large to lead to prison, and people in default often opt to flee the country rather than risk going to jail. The losses from customers fleeing credit card bills and car loans have been considerable, amounting to what officials at several large banks have described as half their "bad debt". These institutions have been busy relocating staff to debt collection, instructing them in the arts of "soft negotiating" and customer profiling.
Some, including HSBC and Citibank, have introduced programmes designed to make it easier for the indebted, in the form of extended grace periods and low-interest loans, to pay off large credit card debts. But some have also turned to aggressive collection tactics, or so the customers say. As well as hounding clients at all hours of the day, including weekends, banks are accused of haggling over outstanding balances of seemingly inconsequential amounts and threatening to unilaterally close accounts.
If these "incentives" fail, as in the case of Mr Malik, the next step can include dangling the spectre of debtors' prison. He said he consistently paid his minimum monthly balances, and only during a recent business trip to Scotland did he miss Dh600 (US$163) of required payments on each of his two Emirates NBD credit cards. The bank phoned him when he returned to work. "I said I'd make the payment when I finish work," Mr Malik said. "He asked me what time I'd finish work, and I said 5pm or something." At 6pm, the next call came as Mr Malik was still working.
"So the guy said, 'Look, you promised me you were going to make the payment at 5pm.' I was like, 'Look, I'm still at work. When I finish work, I'll make the payment'." Eventually, Mr Malik said, "the collections guy said, 'If you don't make the payment, I'm going to cancel your account right now and I'm going to cash your security cheque. The minute your security cheque is cashed, and the cash isn't in your account, the police will pick you up, and you can make the full payment from the police station.'"
That last salvo was enough. "I had to get from my desk, run down to Emirates bank in Dubai Mall, make the payment, and then call him back to say the payment's been made. The reason why people are leaving debt behind, from what I've learnt from my situation, is because people are scared." Despite repeated requests, officials at Emirates NBD did not respond to questions. Not all customers feel intimidated by debt-collection tactics. Yousef al Junaib changed banks after receiving round-the-clock calls from HSBC employees and automated voice machines.
He is mostly annoyed by them. "They have this automated system calling you, but it's a computer," said Mr Junaib, 55, an Emirati who works as an electrical engineer and who had banked with HSBC since 2002. "It just calls you to say that your account needs to be paid, every hour. It's terrible" Elsa Fourie, 49, a South African who works as a nurse in Abu Dhabi, said she was hounded by collectors from HSBC until she paid an outstanding credit card balance of just Dh16. She said: "They're sponsoring rugby teams in the World Cup. Why would they care about Dh16?"
HSBC admitted to employing some "annoying" tactics. "We operate on a dialler technology which will continue to phone a customer throughout the day until contact and payment arrangements with the customer have been made," said Jamie Guzman, the bank's deputy head financial risk for the Middle East. She did not deny the bank was calling at weekends, contacting customers throughout the week between 8am and 9pm, with the exception of avoiding "certain festivals, religious holidays".
Still, says Deepak Tolani, a banking analyst at Al Mal Capital, banks in the UAE are not entirely at fault for going to unusual lengths to recover debt. The country lacked a mature institutional framework in the form of a credit bureau to track the indebted, had a highly transient population of primarily expatriates and still imprisoned those in debt, he said. This left less room for banks and customers to come terms with one another. "You're forced to pay the debt or leave the country. Otherwise, you end up in jail."