Abu Dhabi, UAETuesday 22 October 2019

Banks should not encourage people to get into debt

Cold-calling could leave the vulnerable having to pay back sums they cannot afford

UAE banks should not engage in cold-calling their clients. Alamy Stock Photo
UAE banks should not engage in cold-calling their clients. Alamy Stock Photo

Over the last couple of years, there has been a shake-up of the country’s banking sector, reflecting trends in the global marketplace. Chilly winds from overseas have had an effect on local performance, with a direct impact on our local banks and UAE branches of foreign institutions. Some foreign banks have also suffered setbacks elsewhere that have necessitated cutbacks here.

There are now encouraging signs of new green shoots in the economy but we are not yet entering a new period of rapid growth. At such a time, one would have thought that UAE banks would be wary of engaging, once again, in the hard selling of credit cards, together with their associated debt.

I was, therefore, surprised recently to receive an unsolicited call from my own bank to try to persuade me to transfer a sum of money from a credit card I hold with them to my current account. This, I was told, was a particularly attractive offer as it came with a reduced monthly interest rate of 1.75 per cent, compared to a prevailing rate of about 3 per cent. I would then be able to use this money from my current account while paying back the sum transferred – Dh30,000 was suggested – over a fixed six-month period, together with the interest.

On the day in question, as I wasn’t particularly busy, I allowed the saleswoman on the phone to deliver her spiel so that I could ask a few questions.

Although she said I could transfer money from any credit card, she was mainly interested in the cards I held with that bank. She obviously had some access to my account data, since she knew how many cards I had and that I had a current account with the bank, although her level of access did not allow her to see my balance. Had she been able to see it, she might have realised that I was unlikely to agree to take on any unnecessary debt.

I thought it would be a good idea to check whether she was, in fact, calling from the bank she claimed to represent. I asked her to confirm where she worked and she arranged to send me a special number via a text message that promptly came through from a number the bank regularly uses to inform me of transactions on my account. So that checked out – it wasn’t a telephone scam.

I decided at that point to end the call but first asked the caller to make a note of some points to be relayed to her supervisor.

Principally, I objected, as I told her, to receiving calls from my bank, inviting me to take on debt. I told her that I was well aware that some people receiving such calls might have an urgent need for more cash in their current account and might, therefore, be willing to accept this offer of access to instant cash in exchange for a significant credit card debt, albeit at a reduced interest rate. They might then find it difficult to repay within the fixed six-month period.

During our conversation, I told her I would be delighted to receive a call from the bank’s customer service department to discuss the issue before writing this very column. Ten days later, I am still waiting for that call.

I have been here long enough to remember the years when local banks would cold-call people to offer credit cards. I, like many others, know of individuals who took on more cards than they could afford, sinking gradually into an ever-deepening spiral of debt. The problems caused by this were, and still are, wide-ranging. Bankruptcies, people absconding from the country leaving unpaid credit card debts, stress, and worse – all these and much more are far from unusual.

For a while, the number of these calls seemed to subside, perhaps as banks found that they had to write off such debts as unrecoverable. I am disappointed to see that they are making a comeback.

Banks should be encouraged to act responsibly and shamed if they do not have their clients’ best interests at heart. Financial literacy is also an indispensable tool for people to make sound choices. Only then will these cold-calling tactics become a thing of the past.

Peter Hellyer is a consultant specialising in the UAE's history and culture

Updated: September 30, 2019 08:44 PM

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