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.