UAE: Can banks block end-of-service benefits for unpaid loans or credit card bills?

Khaleej Times

30-03-2025

Question: I resigned from my work recently. I have some outstanding loans and credit card bills. Can my bank claim these from my end-of-service settlement?
Answer: In the UAE, a personal loan provided by a lender to a borrower may fall under the provisions of Notice No. 3692/2012 of the Central Bank of the UAE pertaining to General Terms & Conditions and Loan Agreements texts drafted and approved by Emirates Bank Association. When a personal loan is granted to a borrower, a lender will enter into a personal loan agreement with the borrower.
A personal loan agreement between a lender and a borrower may include a clause stating that the salary and the end-of-service benefits of such borrower should be credited to a bank account of a lender from whom he or she has availed personal loan. This is in accordance with Article 2(1) of Securities and Documentation of the Personal Loan Agreements Formats Approved by the Central Bank of UAE.
As a guarantee and security to pay the loan interests, commissions, fees, and any other amounts that become due under this Agreement the Borrower commits and undertakes as follows:
1. Provide the bank with a letter from the borrower's employer pursuant to which the employer undertakes to transfer his monthly salary and the end of service benefits to the bank throughout the loan period."
Furthermore, a lender may have the right to demand a borrower to pay the outstanding balance of the personal loan if it feels that an event (maybe termination of employment) could lead to the inability of a borrower to repay the personal loan. This is by Article 4(6) Personal Loan Agreements Formats Approved by Central Bank of UAE, which states, 'The Loan elapses and all the instalments, interests and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the bank according to this Agreement or by the law in the event of the occurrence of any of the listed below events:
6. If the bank notices that there are grounds which could lead to the inability of the borrower and/or any of his guarantors, as permissible under Central Bank's prevailing regulations, to fulfil his obligations towards the bank."
Based on the aforementioned guidelines of the UAE Central Bank on personal loan agreements, in the event of termination of your employment, the lender may not allow withdrawal of money from the account once your end-of-service benefits are credited to the bank account with the lender with whom you have an outstanding personal loan.