Abu Dhabi, UAETuesday 18 February 2020

The Debt Panel: 'Can a bank file a bounced cheque case in Sharjah if I live in Dubai?'

The Filipina has run up debts of Dh230,000 by sub-letting apartments and lending money

Illustration by Mathew Kurian 
Illustration by Mathew Kurian 

I was offloaded from a flight leaving Dubai towards the end of last year after a travel ban was filed against me in Sharjah for a Dh40,000 bounced cheque.

This happened because I have not paid my credit card for more than a year as the bank wants a lump sum of Dh30,000 to secure a settlement plan of Dh2,700 a month for two years. But I just don’t have the money. I have asked the bank to waive the late penalty fees and instead provide me with a settlement plan that factors in what I can afford to repay. After a year, I would be able to increase my repayments as I will have cleared other obligations by then.

I am 36 and have worked in Dubai in real estate for 11 years, where I earn Dh13,500. My debts are:

Personal loan: Dh120,000 (monthly repayment of Dh5,580)

Company loan: Dh4,000 (I have one more year of repayments)

Credit card 1: Dh4,100 (I will close it this month)

Credit card 2: Dh22,500 (I will secure a settlement on this once I close credit card 1)

Credit card 3: Dh82,000 (This is the card linked to the bounced cheque)

Total: Dh232,600

I know it was a big mistake to take out so many loans and credit cards but I used the money to rent out apartments and then sublet them to other people. I did this hoping to earn more money, but some tenants left without paying.

On credit card 3, my outstanding balance was Dh40,000 until the bank increased the limit to Dh80,000 after I made all my payments on time. I used the extra credit to pay other credit card bills and rents. I then rented a studio, as well as a two-bed and a three-bed apartment and sublet them. First the studio tenant left without paying. Next, two guys living in the two-bed apartment lost their jobs, and a lady renting the same apartment as me lost her job too. It was a total disaster and I had to top up my loan to pay off the bills.

My situation later improved a little so I started lending money to people with interest. I lent one lady Dh30,000 and she paid back Dh10,000 before leaving the country still owing Dh20,000. I also send money home to the Philippines to support two siblings through college.

Is it legal for a bank to file a case in Sharjah when I made the application in Dubai and have a residence visa in Dubai?

Also what is the difference between Dubai and Sharjah when it comes to bounced cheques?

I know I overspent but most of the money went to family back home. My husband pays most of our bills including our baby’s needs except for house rent and he cannot help me repay my debts. How can I get this travel ban lifted? VL, Dubai

Debt panellist 1: Ambareen Musa, founder and chief executive of Souqalmal.com

Relying on expensive credit card debt to finance a very risky side hustle was not a good idea. The UAE's banks and credit card providers reserve the right to file a criminal case and request a travel ban against any borrower whose security cheque bounces due to lack of sufficient funds.

To lift the travel ban, you need to meet the bank's repayment requirement.

Ambareen Musa, Souqalmal.com

Since it is common for banks headquartered in other emirates like Sharjah, Abu Dhabi or Ras al Khaimah to extend credit facilities to borrowers in Dubai, it allows the bank to file criminal charges within any emirate it operates. To lift the travel ban, you need to meet the bank's repayment requirement (which could involve paying back the security cheque amount of Dh40,000 or accepting the bank's restructured repayment plan with a lump-sum payment of Dh30,000). The ultimate decision to uphold the travel ban request or withdraw it, is with the bank.

Coming to possible solutions, ideally you should tap into any savings or borrow from a close relative to gather the funds to make the Dh30,000 lump sum repayment required by your card provider.

However, if there's no way of doing that, you are left with two more options. First, enlist the services of a licensed debt counselling/management company to negotiate with the credit card provider on your behalf. This could be one way of getting access to a more favourable repayment plan. The second option is to use the UAE's newly introduced personal insolvency law to petition the civil court and request a court-mediated settlement. However, such a settlement would cover all your loans and credit card debt, and not a specific debt.

Another important point for the future: as a credit cardholder, you do not have to accept an increased credit limit on your card. Banks in the UAE may increase your credit limit for a number of reasons (paying your bills on time, not exceeding the credit limit), and they are supposed to give you prior notice and an option to decline the increase. Once a limit has been bumped up, you can place a request to have it reduced if you don't need it or will have trouble managing higher repayments.

Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets

You have certainly borrowed far more than is sensible given your income and you have broken UAE law by subletting a property without the permission of the landlord and lending money and charging interest.

When anyone borrows money from a bank, they sign paperwork accepting the terms of the loan or credit card. This lists the penalties and additional fees for late payments. If you have not paid anything on one credit card for a full year, it is not surprising the bank took action to recover the money. Most laws regarding debt in the UAE are federal, meaning they apply in all seven emirates. If you borrow from a bank in Sharjah and are resident in Dubai there is no change to liability and action that can be taken against you.

The only current difference between the emirates is that bouncing a cheque for less than Dh200,000 is not a criminal offence in Dubai unlike the rest of the emirates. Only in Dubai can you pay a penalty rather than have the possibility of imprisonment for a bounced cheque.

The UAE’s new insolvency law is coming into effect this month, so this should give you an opportunity to approach the courts in the emirate in which you are living to come to an arrangement to repay what you owe. You will have to provide full details of your financial circumstances and the court will structure a repayment plan that is reasonable for you to pay and which the banks will accept without taking further action provided you comply and make repayments. This will give you the opportunity to repay what is owed and continue working in the UAE.

Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com

Of all the mistakes that led you into this financial mess, I want to focus on a couple of more subtle ones so you don’t make them again.

First, you tried to be too clever with your money. This never ends well. Sub-letting apartments with a landlord's permission can be great if it covers your rent or makes you a profit, but you run the risk of having to cover the rent if a tenant leaves. Given that you can’t enforce a legal contract with your sub-let tenants, that risk is very high.

Also, lending money is a terrible idea, especially if a) you have a chain of rental sublets that could fall apart at any moment and b) you are charging high rates of interest, creating problems for your borrowers rather than solving them. You are not a bank and can’t impose a travel ban, so no wonder people left. They wouldn’t have borrowed the money if they weren’t in a difficult situation already.

Your second mistake was that you did not keep a cash buffer to save you if everything went wrong. If you kept aside three to five months’ total expenses, including the full cost of all the rent you were paying across different properties, then you could have weathered this storm.

You, your husband and your family in the Philippines need to have a frank discussion about how you can all work together to fix your situation. Your husband will need to contribute in financial and non-financial ways and your family will have to get by receiving less from you.

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

Updated: January 7, 2020 01:57 PM

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