UAE: Can banks file case against customers who are unable to pay credit card dues?
Question: What are the legal options open to me if I am unable to pay off credit card bills? I am in a dire situation and can't afford to pay bank card dues. What kind of action can the bank take?
Answer: In the UAE, a credit card facility provided by a lender to a borrower may come under the provisions of rules and regulations governing the terms and conditions of a personal loan.
While a credit card facility is granted to a borrower, a lender may collect cheque(s) as security against the sanctioned limit of a credit card. This is in addition to a signed loan agreement or application form which contains the terms and conditions governing the issuance of a credit card to an applicant.
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Any individual who fails to pay three consecutive monthly bills on credit card or six non-consecutive monthly bills of credit card may be considered as an event of default.
This is under Article 4(4) of the Personal Loan Agreement format of Notice No. 3692/2012 of Central Bank of the UAE about General Terms and Conditions and Loan Agreements texts drafted and approved by Emirates Bank Association, 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 in accordance with the law – in the event that the borrower failed to pay three consecutive instalments or six non-consecutive instalments of the monthly instalments without the approval of the bank.'
In case of a default, a lender may choose to deposit your security cheque(s) for collection (if any). Should the said security cheques be dishonoured due to insufficiency of funds, a lender may file an execution case against you. This is in accordance with provisions of Federal Decree-Law No. 50 of 2022 Issuing the Commercial Transactions Law.
Furthermore, a lender may approach the relevant court which has jurisdiction if the outstanding amount is more than Dh10,000 and request the imposition of a travel ban on you in accordance with provisions of Article 324 and Article 325 of the Federal Decree Law no. 42 of 2022 on Civil Procedures Law.
Additionally, a lender may have the option of filing a payment order case or a civil case against you in court to recover the outstanding debt. If the final judgement is not in your favour, a lender may proceed to file execution proceedings against you and that may include a request to impose a travel ban and issue an arrest warrant against you.
It may be prudent for you to approach the issuing bank or financial institution, present your case if there is any strong reason due to which you are unable to pay, and seek relief in terms of settling these dues in instalments and seek a waiver from payment of penal interest before they proceed ahead to file legal action against you.
The issuing bank or financial institution reserves the right to accept or reject this request. You may also consider declaring yourself insolvent as per the provisions of UAE Insolvency Law which is applicable to the individuals in the UAE.
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