Bank account holders face 1-year ban for bounced cheques

Customers that issue four bounced cheques or more will be placed on blacklist says UAE's central bank
Bank account holders face 1-year ban for bounced cheques
UAE customers that issue four cheques that cannot be honoured will be placed on a blacklist
By Claire Ferris-Lay
Sun 11 Sep 2011 11:13 AM

UAE bank account holders who issue four cheques that bounce within a year will have their account suspended for 12 months and will not be allowed to open new accounts, the UAE’s central bank has said.

Customers that issue four cheques that cannot be honoured will be placed on a blacklist, which will then be circulated around the rest of the country’s lenders, Al Ittihad newspaper reported.

“The banks [have] the right to close the accounts of any client if they have bounced four cheques within one year, due to lack of funds,” Saleh Al Tinaiji, executive director at the banking auditing and inspection division at the central bank, told the newspaper.

 “The bank would send the name of the client to the central bank to blacklist him/her [and] ban him from having any new accounts for a year,” he added.

Under UAE law bouncing a cheque is a criminal offence, which carries a prison sentence, although most instances involving small amounts are settled out of court.

The new rule is part of ongoing measures by the central bank to bolster the Gulf state’s banking system. Dubai’s burst property bubble left UAE lenders with heavy exposure to the emirate’s indebted state-owned firms, dragging down the oil-reliant UAE economy.

The number of bounced cheques during the first four months of 2010 was valued at AED18.6bn ($5bn), according to central bank data.

Al Tenaiji in August said the central bank plans to review its retail lending rules at the beginning of next year. “The central bank is still receiving feedback from banks and customers,” he said.

“We will collect all of this information until it gets [to] such a time to study it and submit it to the board of directors to see if we need to amend the regulations," he added.

The UAE said in February that it would curb excessive bank charges to consumers in a roll-out of wider regulations aimed at stopping excessive lending practices seen during the oil boom years of 2007-2008.

The central bank of the Gulf state also capped personal loans at 20 times a borrower’s monthly salary and said repayment periods can’t exceed 48 months.

Monthly installments for all loans, including personal, car, housing loans and credit cards, must not exceed 50 percent of a customer’s gross salary and any regular income, the central bank said.

In June, shops in the Gulf state were barred from charging consumers additional fees on purchases made with credit cards as commission.

 

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