Gulf lenders are now employing international debt collectors to chase 'skippers', sometimes years after the event.
At the height of the downturn last year, it was claimed 2,500 people a month were absconding from Dubai alone with unpaid credit card bills. While some may think the debt stops at the border, Gulf lenders are now employing international debt collectors to chase ‘skippers’, sometimes years after the event.
Sitting at home in the English countryside, Jean feels a sense of dread whenever her phone rings or the postman arrives at her door. Last year, she lost her media job in Dubai and, unable to meet her loan and credit card repayments, felt she was left with no choice but to flee the country. She still hasn’t been able to find a job in the UK, but aims to repay the loan when she can. She worries she will be left looking over her shoulder until she does.
Jean is right to worry. Only last month, Arabian Business was contacted by another one-time expatriate, Ian, who thought he had escaped the debts he couldn’t pay by fleeing from the Gulf back to Britain nine years ago. Today he is being chased by collectors in the UK who have purchased his debt, and Ian believes he may now lose his house and car.
Such cases have become increasingly common, says Radha Stirling, founder of the London-based organisation Detained in Dubai. Stirling says she receives up to seven calls a day from expats in Dubai and the rest of the Gulf who are worried they will be unable to repay their loans and are wondering whether they should flee the emirate in an attempt to avoid jail time.
In May 2009, during the height of stories about the downturn in Dubai, David Martin, a business advisor at RAKbank in Dubai, claimed that the number of people opting to flee the UAE without paying their credit card bills was as high as 2,500 customers per month.
Stirling says Gulf banks are “more likely to want to negotiate when you are out of the country as they cannot hold the jail card over you.” She claims she has been able to negotiate successful settlements with Dubai banks for her clients to repay their debts while abroad.
However, Mohammed Ibraheem Kahn, CEO of Dubai-based MIK Legal Consulting, which chases those who have fled back to the UK with unpaid UAE debts, says the banks are now more reluctant to negotiate with those who have absconded.
“You think you have gotten away with it but you haven’t. If the agency can locate you and the assets are registered to them, then they can reclaim them through a European Payment Order,” he says.
Introduced in January 2009, a European Payment Order means a debt owed in one EU member state can be enforced in each of the 27 other member states. “Dubai obviously doesn’t qualify but the simple way around it is to sell the debt to a European debt agency, which then means that they can carry out proceedings,” says Kahn, who is currently working with some of the UAE’s largest local banks to recover debts from people who have absconded to the UK.
“We are registered with the Office of Fair Trading and we have recovered debts in the UK, so for us it is quite simple,” he adds.
Outside Europe, debt can also be chased, says Michael Collyer, general manager of Global Credit Solutions based in Australia. “From a debt collection point of view, a debt is payable anywhere in the world, wherever it has arisen. Just because a debtor moves country does not remove the responsibility for the debt and indeed if a UK expat leaves a debt in Dubai a collection company can and will pursue them. The same principles apply to the US and Australia and indeed most other countries.”
The debt collection business has gone global and is now totally borderless, says Gareth Thomas, managing director of International Credit Enforcement (ICE). ICE has offices in Dubai and Thomas says international collectors are now also targeting expats who have fled to the UAE to avoid unpaid debts overseas.
“I have actually done a case, which is ongoing, where [the debtor] absconded from Australia to Dubai and left a debt with a personal guarantee in Australia and now is being pursued within the UAE,” he says.
One of the institutions currently pursuing global absconders is Standard Chartered, which claims to have an in-house tracing unit using various tools to allow the bank to chase customers who have absconded.
Touhid Rafiquzzaman, Head of Credit, SME and Wealth Management says: “Standard Chartered does use overseas debt collection agencies where appropriate and where customers have fled the country without informing the bank. It also has a presence in over 70 countries and utilises offices abroad to help collect debt where and when possible.”
The bank says it has had success “in retrieving as well as restructuring debts of those who leave the country.” While the costs can be high to chase a debtor overseas, Kahn is of the opinion that it is easier to chase someone in the UK for an unpaid debt than it is in the Gulf. “It is so much easier in the UK,” he says. “To go through the courts [in the Gulf] to get an action would take months or a year. In the UK, we can get an action done within 30 days, after the notice has been served and you have not responded. We can go through the County Courts, get an action and off we go.”
Another benefit of chasing debtors in the UK is the fact that all the charges involved in chasing the debtor are chargeable to them, he adds.
“We would notify you initially by letter to say you owe X amount in Dubai and you are given fourteen days to make contact and repay. If you repay that amount we would probably deduct [the charges] from the creditor,” he says.
However, if debtors ignore the demand letters from debt collectors, Kahn says they will charge them for the court order, for the cost of visiting the debtor’s house and for the use of a van to remove their assets.
“In Dubai you can’t charge additional charges [to the debtor], but in the UK if you have a AED2,500 ($680) debt and we chase it in the UK it can easily escalate into an AED85,000 bill,” he says. “In Dubai you can’t go in and empty someone’s property. But in the UK we can legally break your door down and if you resist we can get the police. They can set you aside and we can go in and empty your whole property.”
Even if it is years after the event, banks are now selling on debts to UK and foreign collection agencies, and Kahn says that old debts are often easier to chase. “It is better if it is a few years old as you are probably settled down [by then] and have some assets, at the minimum a car,” he says.
One issue some absconding expats worry about is the impact skipping will have on their credit rating back in the UK.
However, James Jones from UK-based credit rating agency Experian Ltd says they need not worry. “Credit report data is not currently shared across borders, so UK lenders cannot access credit data stored elsewhere. Generally, the only way for a credit history to follow a consumer from one country to another is if the consumer takes a copy of their own credit report with them,” he says.
For Jean and Ian, their credit rating is the least of their worries.