The Debt Panel: 'Can my bank file a police case against me for missing one payment?'
The Dubai resident lost her job in February and missed her first debt repayment in June
I have been a customer of the same bank for about five years, where I have a personal loan as well as a car loan and a credit card. Unfortunately, I was made redundant from my position at a radio station in February due to Covid-19 and the company has shut down. I still had some savings so I managed to meet the repayments until June 1.
I sent the bank a few emails asking for deferral; this was particularly relevant during the movement restrictions as there were no job interviews at the time. However, my application was rejected because I did not meet the criteria. I then asked what else I could do. I wanted to email someone or speak to someone at a branch, but I did not receive a response.
My credit card debt was settled by my credit shield insurance.
My debts are: outstanding balance / monthly payment
Personal loan: Dh56,000 (Dh2,281)
Car loan: Dh37,000 (Dh1,525)
I have made several attempts to reach out to the bank and made it clear I have no intention of running away from my financial obligations.
I borrowed the money to help my sister settle a loan back home in the Philippines because she was diagnosed with cancer and needed my financial support.
When my savings dried up after the March, April and May debt repayments, I could not meet the instalments at the start of June and asked friends if I could borrow money to help me get by. I then received an email from the bank’s collections department stating that legal action would be taken against me if I failed to make a payment by June 24. I immediately replied asking for extension but I did not receive any feedback. I was waiting for my friend's salary to come in on the 25th to allow me to clear the debts.
By then I had also received a text message from the bank that my security deposit cheque of Dh109,488 had been paid in, which of course then bounced. On the morning of the 25th, I visited a branch and made the minimum payment on the missed payments.
However, on June 29, I was called by Dubai Police, who said a case had been filed against me by the bank. I have lived in the UAE for 13 years and I thought you need to miss at least three payments before your bank can take your case to Dubai Police. My issues had happened over less than a month.
I have made several attempts to reach out to the bank and made it clear that I have no intention of running away from my financial obligations.
I can afford to repay my debts if I can secure another job. I also have properties back home and I am trying to sell one so that I can close the personal loan but in the current market conditions, it will not be easy to dispose of. For now, family and friends are helping me. In the past, my monthly expenses came to about Dh6,000 with the rest of my income set aside for saving.
I am 44 and have always been diligent in paying my financial obligations which is why I was very surprised that the bank has done this after one month of missed payments and not even extending the courtesy of notifying me. Can I file a case against them for damages? This situation has affected my health and family. CM, Dubai
Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
You have done the right thing by maintaining continuous contact with your bank as soon as your situation began to worsen. Hopefully, you have a written record of your correspondence, which will help show your commitment to finding a fair resolution.
As a next step, carefully read and analyse the terms and conditions of your agreement with the bank. The obligations of each party should be clearly highlighted and detailed in the contract. Typically, when you only miss one loan repayment, banks charge a late payment fee. However, after three missed loan repayments and prior warnings from your bank, a police case could be filed against you.
For now, make a final attempt to approach your bank and renegotiate the terms of your loan based on your current financial situation. Also, ask the bank if it can offer you instalment postponements on the basis of the ongoing Targeted Economic Support Scheme (Tess) programme where customers who provide evidence of being impacted by Covid-19 can be offered some financial relief.
Alternatively, if the bank remains unresponsive, seek advice from a legal representative to fully understand your options. Your legal representative will help investigate the nature of the case, shed light on your situation, and help you liaise with the Central Bank of the UAE if you wish to escalate this case further.
Approach the Central Bank's Consumer Protection Division, which was established to protect consumers from financial misconduct and unfair banking practices, with the necessary proof of your multiple attempts to contact your bank, as well as any statements that support your application.
Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com
This situation with your bank sounds unfair. Even if the bank was justified in speeding up its debt collection efforts, given the current pandemic situation, it should have acknowledged your request for an extension.
Filing a police case against a borrower shortly after they miss a repayment for the first time is a drastic measure. It is likely your final salary credit from your previous employer earlier this year played a role in how the bank treated your case. Banks in the UAE reserve the right to demand full and immediate settlement against outstanding debt in many scenarios, and loss of employment is one of these. The police case may have been filed on short notice to deter you from leaving the country, leaving your unpaid debts behind.
However, the fact the bank did not give you adequate notice or alternative solutions can be taken up further. Lodging a formal complaint with the Central Bank is straightforward: either fill in an online complaint form on the website, call their toll free number 800 CBUAE (800 22823), or personally visit one of their branches in the UAE.
Another option is to seek pro-bono legal help. The Philippine Consulate in Dubai and the Philippine Embassy in Abu Dhabi run free legal aid clinics every month, where lawyers offer free counselling for Filipino expatriates dealing with legal issues in the UAE, including debt management. Visit them for a consultation armed with all relevant documents and proof of attempted communication with the bank.
Since you have the financial resources back home to repay your debts, you may want to ramp up your efforts to liquidate some of these assets. Now that there's a police case filed against you, you will not be able to exit the country. With no immediate job prospects, you will find it incredibly difficult to sustain yourself here.
Debt panellist 3: Stuart Ritchie, chartered financial planner at AES International
The first step is to find an income source so you can start to tackle your debt. After securing an income, your priority should be to meet the minimum payments on your loans. Also, save up an emergency fund to cover three months of your typical expenditure, and then you can bring those debts down further by repaying in instalments that are higher than the minimum. This will reduce the overall amount you pay back. It’s up to you whether you build up your emergency fund first or pay back your debts alongside it.
There are two main loan repayment methods to consider. From a financial planning and mathematical perspective, the avalanche method is best, while the snowball method may be preferable from a psychological standpoint. In both methods, you’ll use your disposable income to reduce your loans quicker than if you only achieve the monthly minimum payments.
With the avalanche method, you’ll put all of your surplus income towards the loan with the highest interest rate. This reduces the amount you repay overall, as you are reducing the capital that the interest is growing on.
The snowball method involves repaying the smallest loan first. Although you end up paying back more overall, many people prefer this method as it achieves quick wins through seeing a reduction in the number of loans you are liable for.
Also, consider selling items to create an income stream. If you don’t absolutely need your car, for example, selling it would benefit you twice, as you could pay off your car loan and hopefully have some equity left over to put towards your personal loan.
Finally, seek legal advice with regards to your legal rights. You may be entitled to a payment holiday on your loans, and you may have some sort of payment protection insurance.
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 firstname.lastname@example.org
Updated: July 21, 2020 09:27 AM