UAE lenders 'hire UK debt collectors' to chase defaulters

UK charity says it has clients who are being chased for UAE debts in home country.

UAE lenders have begun hiring British debt collectors to chase defaulters who have fled back to the UK without settling their debts, according to the head of a UK-based charity that advised people who have fallen into legal trouble in the emirate.

“I have spoken to people who have said they are being chased by debt collectors,” Radha Stirling, founder of the London-based charity Detained in Dubai, told Arabian Business.

However, she said that the UK debt collectors “are not following through on their threats” as they do not have any power to force the repayment of loans owed to Dubai lenders.

“I think it is a scare tactic and I think the Brits are on to it and pretty much ignore them anyway,” she said.

“As there are so many debt collection agencies in the UK, it is very easy to employ one and their terms are quite good,” she added. However, she believed it was only those that owed a considerable amount of money that were being chased in the UK as “as it wouldn’t be worth chasing the smaller debts.”

In January, the Emirates Business newspaper reported that Dubai mortgage lender Tamweel had hired a company to pursue an Indian customer and is threatening to take legal action in India and the UAE if the customer does not repay its loan.

“If the customer chooses not to cooperate, then, under the legal framework, we reserve the right to recover our dues," Tamweel was quoted as saying in a statement.

Last week, a Dubai-based financial consultancy ISDM told Arabian Business that the average debt load of its customers is AED500,000 ($136,121) with its most indebted client carrying AED26m worth of real-estate linked liabilities.

ISDM has more than 3,000 clients on its books and said that about 70 percent of its customers are defaulting on consumer rather than business loans. The consultancy advises clients in debt distress to consolidate their loans, and will negotiate with banks on their behalf for a freeze in interest rates and a restructured payment plan. It collects a two percent fee commission based on the overall value of the debt.

About five percent of the firm’s client portfolio comprises ex-UAE residents who have skipped the country rather than face jail for their loans.

“The number of ex-residents contacting us is growing. Skipping was not their preferred option. Many didn’t want to leave the country and would have preferred to resolve the debt here. But due to the lack of options – either go to jail or skip – they chose to skip,” said Yohannes Mazeingi, managing director of ISDM.

Under UAE law, bouncing a cheque is a criminal offence that can result in a jail sentence. Blank cheques are commonly used to underwrite financial arrangements, such as credit cards or bank loans, to guarantee future payments.

Research by RAK Bank last year indicated up to 2,500 UAE residents were skipping the country each month without settling their debts.

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Posted by: Matt Williams

I made a comment on here as of yet not printed by AB which I find odd. Let?s talk about people that stayed and actually faced up to their debt. I was sold a property in Shahama 4 years ago off plan, shortly after the markets collapsed and the developer stopped building (had not actually really started). I had signed an interest only repayment pre EMI from this bank intended only to be for 6 months as I did not intend to keep it and was not a cash buyer so could not sell it before then. When everything went belly up the bank did not listen to me ref interest payments which exceeded 5k aed a month, they did not consider that they promoted this project and backed it fully, so for the next four years they took every month 5k from me. So four years later I have paid out nearly 300k and the property is just about ready this is dead interest. I am just as much to blame as it was me that said yes, however the point is that some of us did not do a runner, some of us stayed and honored our debts

Posted by: CKI

Oh Matt. Sigh. First, my question "Did you suddenly find yourself with no income?" Your reply " I lost my job however found another one as I am in an industry that is adaptable." So you were lucky to be in that industry. What about someone who could not get another job? You loftily, in capital letters, ask why they did not save for an eventuality. Do YOU know for sure they could have and did not? Or are you one of those people who would rather quickly and loudly condemn others so you can perceive yourself in a better light? Also, I repeat "some people skip because they are dishonest. Most people skip because they are terrified." Cut the terrified ones some slack, they may not be as financially savvy or forward thinking as you are. All of us are not born equal.

Posted by: Matt Williams

@CKI - The stress that I have gone through over the past 4 years has contributed to many health issues and I have worked my tail of to stay ahead of the game and been threatened by an inflexible bank many times. I lost my job however found another one as I am in an industry that is adaptable. I spent within my means and saved! YOU KNOW SAVE!! You have NOT ONCE centred on the aspect of irresponsible borrowing, you have just offered a poor me scenario to those who had money forced on them and then had to leave!. For those people that lost their jobs and had no choice I respect that they had no choice BUT DID THEY SAVE FOR EVENTUALITIES???, however for those that just left and took the easy option they have my contempt. Many that stayed got hammered by banks to recoup what those that left...left behind in debts. I take pride in my position your damned right about that!

Posted by: CKI

Matt, there are loads of people like you out there who take great pride in pointing out that they did not skip the country. Did you suddenly find yourself with no income? Were you faced with an imminent prison sentence despite desperate attempts to reach a workable solution? Would your family have been left to the mercy of the elements and/or the unscrupulous if you had to abandon them while you served your sentence? Have you heard of hell-hole jails back in your home country? Were you brought hearing that it is better to end your life than go to jail? If you had to answer 'yes' to any or all of the above questions, would you have waited at home, anticipating the knock on the door? If you answered 'yes' to that last question, I salute you, you are indeed a stalwart and may there be more of your kind. But remember, some people skip because they are dishonest. Most people skip because they are terrified. But pity them all instead of condemning, for you do not know the hell they have seen

Posted by: RMN

In their need (greed?) to grab the market, UAE banks do not ask for collateral for personal loans. Credit cards are issued after superficial checks. In the UAE, it is illegal to issue blank cheques, but banks continue to insist on them.
THAT negligence on the part of the banks should be considered a criminal act. If it has to be a criminal, the party receiving a blank cheque should receive the same penalty as that given to the issuer!
Unfortunately, the victim is always the Man On The Street, surrounded by images of beautiful things he could never ordinarily afford. Then he sees "SALE!" signs all over the place. But he does not have even that much money. Then, to his delight, he is approached by the banks. He is euphoric. How easy to make his dreams come true! No space for rational thought, he is too happy.
He is ignorant. Numbers confuse him. That's how money-lenders/usurers thrive. That's not how banks should make their profits

Posted by: shaheen

In 2008 I read a story in the British newspapers about a judgement which was issued by a Court in Dubai. It concerned a British couple who were resident in Dubai. According to the judgement the exhusband was given custody of the children. The wife left the UAE with the children. The husband who remained a UAE resident approached the British courts with his UAE judgement and the High Court in England ruled that the children should be returned to the exhusband in Dubai. I am not sure however if a UAE court judgement regarding a bank debt against a person in the UK would be enforceable in the UK.

Posted by: anonymouse

If you allow banks to never fail, the bad banks (w/ their bad loans) will never cease.
I am not sure if fractional reserve banking is applied here, but if it is.. well then that would increase bad loans indirectly.

Posted by: John Smith

If you do a skip it's the bank's problem, as someone mentioned above, very poor risk management by the banks left them in this position. As for this scare tactic, that's all it is. Dubai is trying to make people think twice about doing a skip, precisely because it's so easy to do and how powerless they are to stop it. Frankly I am surprised more people don't do it.

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