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Abu Dhabi, UAEWednesday 26 September 2018

The Debt Panel: Bank ignores finance chief's pleas over loan he gave straight back

The Abu Dhabi borrower repaid the debt within days of its issue in 2015, now the bank is demanding Dh63,000

Illustration by Alvaro Sanmarti
Illustration by Alvaro Sanmarti

I work as a head of finance in Abu Dhabi, earning over Dh40,000 per month. I am facing problems with a leading bank over a loan I paid back in 2015. At the time, I needed money quickly to pay emergency medical bills for a family member. I needed to borrow Dh450,000 and because my company was not listed with my primary bank, they were going to apply an interest rate of 10 per cent.

I later borrowed Dh200,000 from another bank, signing documents with the sales agent. This was the biggest mistake of my life, as while I had effectively given my consent for the finance to be transferred, I told the agent that I needed to approve the interest rate before I went ahead.

I later found out the Dh200,000 had been approved and transferred to my bank account. But no one ever informed me of the high 8.5 per cent interest rate. When I found out what it was, the bank had already transferred Dh195,000 into my account after deducting processing charges.

I immediately contacted the representative, as I wanted the bank to take back the money. I also contacted customer service and visited a bank branch to find out how to close the loan. I was ready to pay back Dh195,000, without the Dh5,000, which was a processing charge. Unfortunately, despite multiple calls and meeting the branch, no one provided me with a solution. Ultimately, I decided to transfer the Dh195,000 back to them. Since then I have been contacting various departments on how to get a loan closure confirmation.

During this period, the bank never got in touch. Then in March this year, I received an email and SMS from the bank saying that my loan was overdue and I must pay an instalment to avoid further actions.

I spoke to the collections team and and gave them the complete history with proof of the one-sided communications. They said that even though I have paid Dh195,000 in 2015, since there was no loan closure approved, the settlement had been adjusted. With the interest that has accrued until now, I now owe over Dh63,000; this is what I must pay to close my loan.

The most I am willing to pay is Dh15,000, as I never used the funds and my communications to close the loan were not acted on by the bank. This Dh15,000 offer has not yet been approved. In the meantime, I have paid one instalment of Dh5,800 as suggested by the collection manager. I have also registered a complaint with the Central Bank of the UAE and shared all my documents via their official website. I received a claim number, but no response has come in yet.

What should I do next? I did my best to communicate with the bank and realise my mistake was to sign the documents.

To give you more background, I have one other loan with another bank, on which I owe Dh100,000, which will be settled in June next year. I am from India but have lived my entire life in the UAE. My monthly expenses are Dh11,000 for my loan and Dh15,000 for utilities, rent and school fees. Excluding that normal expenses come to around Dh3,000. MP, Abu Dhabi

Debt Panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank

Signing for a loan without checking the rate and potential fees or charges is indeed a big mistake. While banks should clearly state the cost of borrowing in the main text of the contract, it is also advisable to read and understand the term and conditions, which are often found in the smallprint. This is where important contractual obligations can be found.

As per Central Bank of the UAE regulations, in case of early settlement of a loan, you are required to pay a 1 per cent early settlement fee on the principal outstanding or Dh10,000 whichever is lower. You have taken all of the correct actions to date by registering a complaint with the Central Bank while keeping regular contact with the bank. I encourage you to follow up with both the Central Bank and the lender as soon as possible.

Paying the early settlement charge due when you repaid the Dh195,000 should represent an equitable resolution for all parties. This should be adjusted from the instalment you have already paid on this loan.

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Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com

You undoubtedly made a big error of judgement when you signed off on your loan application without knowing the interest rate you were going to be charged. And while this was the first mistake that stacked the cards against you, you made an even bigger mistake that's left you in this tight spot - you did not follow the correct protocol when attempting to close your loan.

While a loan-processing fee is non-refundable in any case, you would have also had to pay an early settlement fee or loan cancellation fee depending on how long the loan had been active. Since you closed the loan in an unconventional manner, you should have reached out to the bank and enquired about any pending dues.

The next step would have been to obtain a clearance letter or 'No Liability Certificate' from the lender. You mentioned that you had tried to get one from the bank initially, but you gave up when you didn't get any response from them. Ideally, you should have pursued this further, especially since you deposited the loan amount back to the bank without receiving any confirmation of receipt.

The final step, that closes the chapter on your debt once and for all, involves applying for a copy of your credit report and reviewing it for any remaining debt or associated charges under your name.

But now that it's too late to take preventive action, you should consider getting legal counsel to assist with your case. A legal representative will help negotiate with the bank on your behalf. Since the bank too failed to send any reminders to you regarding the missed payments and accumulating interest over this three-year period, you could use this to build your case.

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Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com, which helps residents invest their own money

The success of your case is in the details, given you signed the loan. There may be no evidence that you wanted to check the loan interest rate before disbursement of the loan. It does sound though like the bank was in error by not closing the loan when you refunded it, as long as you informed them of where you sent the money and when. This is a classic example of an issue not resolved at the time that has spiralled into an expensive problem, possibly because you let it drag on while dealing with other priorities. You are correct to push the bank now to resolve this and you may need to push them harder.

Contact the Consumer Protection Unit of the Central Bank on 800 CBUAE and ask them about moving your case forward. Also, seek advice from them on interacting with your bank.

At the same time, try to get a meeting with the most senior person possible at the bank you borrowed from. Start with the head of the branch and work your way up, using LinkedIn to contact people if necessary. Make it clear that you have complained to the Central Bank and are considering legal action. Meanwhile consult a lawyer to see if you have a case for getting the outstanding balance erased and possible compensation. I do not see why you should pay Dh15,000 unless you can see where you were in error.

Your HR department may be able to help you if your company is large enough to have a relationship with the bank.

The loan interest expenses you are paying monthly on your other loan seem high – consider paying it off in advance if you have enough cash. Do not leave yourself vulnerable if you fail to get your Dh63,000 balance wiped though. Get your finances back in shape by saving and investing as much as you can, while reducing your expenses.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to pf@thenational.ae

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