What are UAE laws for loan defaulters 2021?

We are approaching the second anniversary of the pandemic millions have had to suffer in terms of personal losses as well as financial losses, lost jobs, businesses shut, salaries slashed are just some of the things that people have had to go through. UAE laws for loan defaulters in 2021 remain largely unchanged. This is besides the fact that the banks have an instruction to offer deferrals and payment holidays to its customer that cannot afford to make timely payments.

UAE was striken harder because of the slump in oil prices and the almost complete shutdown of the tourism industry at the same time. As a result industries and businesses directly or indirectly dependent on these two also took a hit. But even before the pandemic hit the UAE as it was ridiculed for its insolvency policies, UAE laws for loan defaulters. If you have an unpaid loan, business loan default, or credit card in UAE or anywhere in the GCC click here for your free consultation to learn how you can settle them.

Cheque bounce in UAE | Loan Defaulters in UAE

The law in question being, dishonouring of a cheque in the UAE is considered a criminal offence pursuant to Article 401 of Federal Law No. (3) of 1987 on the issuance of Penal Code of UAE, which states “Shall be sentenced to detention or to a fine, whoever draws in bad faith a cheque without sufficient funds or who, after giving the cheque withdraws all or part of the funds, so that the remaining balance is insufficient to cover the amount of the cheque, or gives the order to the drawee to stop payment, or if he deliberately writes or signs the cheque in such a manner as to make it non-payable..” and it is a well-known fact that the UAE banks and NBFCs abuse this loan defaulters law in order to get their debtors to pay up.

UAE laws for loan defaulters introduced in recent years…

• Federal bankruptcy law UAE

In 2016, it introduced a federal bankruptcy law to help distressed companies avoid bankruptcy and liquidation. But it does not apply to individuals. Also, in 2017, Dubai introduced a criminal order law that punishes a bounced check for an amount less than 200,000 Emirati dirhams ($54,500) with a fine instead of prison. And this law still stands provided you are in the UAE and approach the courts in person.

• Insolvency law UAE

In 2019, the UAE introduced an insolvency law that promises to assist people overwhelmed by debt. This is similar to the bankruptcy law for companies. It allows a person to restructure their debt for a maximum of up to three years. But if they miss a payment, they can still be liable to civil actions. And in November 2020, the UAE introduced amendments to end the criminalization of bounced checks. Though under current laws a creditor would still be able to file a civil case that could lead to imprisonment.

October 2020, the BBC reported on International Monetary Fund Forcast that predict the Middle East is headed for an economic downturn that will be much worse than the 2008-09 global financial crisis, spurred by the coronavirus pandemic and record low oil prices.

Human rights stand on the UAE laws for loan defaulters.

Human Rights Watch wrote to UAE authorities on April 26, expressing concern about the overwhelming limitations imposed on foreign residents. Especially to those who are indebted to UAE-based creditors. The Human Rights Watch also sought clarification of the process for imposing travel bans & relationship between travel bans and foreign residents’ ability to renew their residency and work permits as well as relevant laws or regulations that govern creditor-debtor relations and statistics regarding foreign residents affected by the travel bans. The Human Rights Watch has received no response.

The UAE’s current travel ban policies and UAE laws for loan defaulters appear to violate articles 11 and 12 of the International Covenant on Civil and Political Rights (ICCPR). If you plan on getting back to the UAE and want to close your liabilities before travelling click here to find out how we can help you close the liabilities with the best possible settlement offers.