Loans are sold aggressively to expats, who accept credit to meet the high costs of living in the UAE.
Unlike Western countries, the UAE treats debt as a criminal matter rather than a civil one. The result being that if a borrower is late with payments, they can face fines and imprisonment. Even after they are released, the bank may open a civil case against them which can result in further imprisonment.
This doesn’t make sense to a Westerner used to the protection of bankruptcy laws. After all, if the debtor is in prison, how can they ever earn money to pay the debt? But the Dubai banks think differently than their Western counterparts. Instead of seeing the debtor as an income source they think of them as a hostage that some wealthy relative may sell a property to set free; and as an example to be made to other would-be debtors. HSBC UAE country head Abdulfattah Sharaf explains this rather chilling sentiment to the Arabian Business magazine, where he tells us (about jailing debtors): “It has worked for us. People immediately get people to come and bail them out, and get the money in…(historically) it did work. In most cases it did work,”
Banks in Dubai, knowing they can have a defaulter jailed for missing payments do not feel the need to lend responsibly, as do banks in the West. Most expats will be familiar with getting between two and ten phone calls a day, six days a week, trying to sell them loans and more credit cards. Eventually even the strongest succumb and take credit to finance the “Dubai Lifestyle” and get that better car or house. Others have used finance to assist with unexpected changes in circumstances such as redundancy, medical costs or a serious accident.
Sometimes the borrower’s circumstances change. People become ill, or are fired. They can’t pay what they could pay before. But the banks are unwilling to negotiate. Why give a carrot, when they have such a big stick (jail) at their disposal?
There are Indian labourers who have been in jail for years more than their original sentence for debts as little as £1,000. They have no hope of ever getting out of prison, barring the occasional intervention of an altruistic business man.
Suffocating. When the borrower’s circumstances change, UAE banks are ruthless and relentless
Unsurprisingly then, the defaulter, knowing he or she faces potentially many years in a grim desert jail, often flees the country before the cell doors can clang shut on them. Many of these absconders fully intend to honour their obligations by restructuring their payments, but want to negotiate without a jail sentence hanging over them.
Are the debtor’s worries over when they reach their home country? Are they safe when they escape the reach of the Islamic banks and criminal justice system? At Detained in Dubai we regularly hear from people who took bad advice and paid severely for doing so. Often the advice came from knowledgeable seeming online forums, given by people promoting themselves as experts. This (probably well meaning) wrong advice can be incredibly dangerous.
The debt team at Detained in Dubai has made a list of the most common misconceptions regarding the plight of debtors who flee the Emirates.
- The debt collection agency threatened me with Interpol, but I heard that Interpol are not allowed to chase debts.
Correct. Chasing debts is not part of Interpol’s mandate. However the UAE (coincidentally Interpol’s largest voluntary cash contributor, reaching a total of $54 million last year) gets around this rule by reclassifying the debt as “fraud.” Interpol does not have to investigate whether the charge is real. They just list the debtor with a Red Notice, and if the debtor passes through an international border, they risk detention and the UAE will be asked if they want to start extradition proceedings.
- Isn’t it true that they don’t report debtors to Interpol if it’s under a certain amount?
UAE banks report people to Interpol for both small and large amounts of money. Some people never get reported for large amounts while others have been reported for a few thousand Euros. The minimum threshold is 10,000 Euros but banks can add interest and charges to ensure they meet the standard. Some people get reported straight away, some people get reported years later, some never get reported at all. There is no way to predict what the banks will do. There is no standard “playbook.”
- I have done the online Interpol check and my name does not come up. Does that mean I’m clear?
Interpol does have an online check page, but the UAE is not obliged to publish its notices and thus does not. It is the decision of the issuing country whether or not to publish their wanted list publicly. The UAE choose not to publish theirs.
If you search for UAE Red Notices it comes up zero, even though they issue more Red Notices than any other member state of Interpol. You can see the pagehere
- I have been told that they can’t legally reclaim the debt in my home country
This varies on a country by country basis, dependent on local laws. The UAE has taken legal action in a number of countries and have successfully bankrupted debtors in England. Thanks to the credit agreement the debtor signed in the UAE, it is relatively easy for the banks to acquire jurisdiction in the debtor’s home country and go after the defaulter’s assets. This is often seen as a last resort by the banks because of the expense involved, and the uncertainty of how much they will retrieve. But this should be taken seriously by anyone who has built up savings or assets after leaving the UAE. Coyle White Devine are one firm regularly used in the UK by UAE banks to seize assets and savings from UK citizens.
- Isn’t the debt wiped clean after 6 years?
We have seen a number of applications for debts as old as 15 years. There are a number of tricks that can be applied to ensure the statute of limitations does not apply.
- Didn’t they change the law in 2017 so that a bounced cheque is no longer a jailable offence?
The Emirate of Dubai passed some new regulations to allow Judges to issue fines instead of prison sentences for debts under a certain amount. However, paying the fine does not clear the debt (only the criminal act of bouncing the cheque). And the debt still carries the jail term.
- Didn’t they create bankruptcy laws in 2016 to protect debt victims?
Yes, bankruptcy laws were touted in the national newspapers as being a real step forward in the UAE banking industry and a means of safeguarding debtors. But the laws only cover businesses unfortunately (not private individuals) and the UAE’s own top lawyers have criticised the bankruptcy laws for being essentially inaccessible, and more of a public relations campaign than genuine legal reform.
- I heard that I can avoid paying if I change my name by deed poll or get a new passport
This can offer a level of protection but is by no means a solution that can afford proper safety and has not prevented arrests.
- They will give up on me after a while if they don’t catch up with me.
This is unlikely. Many UAE banks say they prefer to go after a debtor many years later as the person may may be settled and have assets like a home or even a business that the banks can seek to claim.
- They won’t jail me, because how could I pay if I was in jail?
Do not allow yourself to believe this. The bank does not expect you to pay from inside jail. They believe that a wealthy relative will sell a house and bail you out. Even if this proves not to be true (nobody comes to bail you out), the UAE banks would rather keep a debtor in jail as a warning to other would be defaulters.
- If I show I’m willing and ask them to work with me in restructuring my loan, they will do so. After all, this way they get at least some money, right?
Generally UAE banks are entirely unwilling to negotiate or restructure. The debt is almost immediately passed to debt collection agencies and security cheques bounced. These agencies are notoriously unprofessional and ruthless. They are manned by poorly educated & aggressive young men and women who are paid commision on how much money they can extract from the debtor. Their tactics include harassing not only the debtor, but also the debtor’s friends, family, new work colleagues and even customers.
The debt collection agents are often rude and aggressive. Even debtors who have paid their debts in full to a debt collection agent have found, to their horror, that none of the money they paid was deducted from the actual debt. Instead it was swallowed up in “fees and expenses” claimed by the debt collection agency. Dealing directly with these agents is not advisable for people who want to settle their debt situations.
- I have an offer of another job in the UAE, is it safe for me to return and work something out with the banks when I get there? Surely they will be glad that I am ready to pay again?
Absolutely not. If you return to the UAE or even another GCC country, you risk being arrested as you arrive at the airport, and jailed until you have the whole amount ready to pay.
Even if the bank has said they will drop the case in order for you to return, it is not certain that they are being truthful. Many debtors have returned to the UAE, feeling safe because the bank told them this, but were in fact arrested as soon as they reached Dubai.
As well as the UAE warrant, there will be a wider GCC warrant, meaning that it you go to another GCC country (even just to change planes) you can be arrested and transferred to the UAE to face their justice system.
Even Qatar is still officially a member of the GCC. While there is a political standoff between Qatar and the UAE right now, this does not necessarily make it safe to travel to/through. And the two countries could solve their differences at any time.
- Ok then, what is the best way to handle the situation?
Really you need a professional to deal with your creditors and negotiate payment terms you can manage, while protecting you from unpleasant legal consequences.
The good news is that as long as you are outside of the UAE and wider GCC, and in a country with debt protection laws, your situation can be safely fixed. For further, confidential advice, email our debt team: