UAE banks now required to run credit checks before issuing chequebooks

Efforts by the Central Bank of the UAE are aimed at improving responsible lending practices
UAE banks now required to run credit checks before issuing chequebooks
Banks are required to inform customers that returned cheques due to insufficient funds will be recorded with the AECB, negatively affecting their creditworthiness.
By Lubna Hamdan
Tue 11 Dec 2018 10:32 AM

The Central Bank of the UAE (CBUAE) has requested all lenders to run credit checks with Al Etihad Credit Bureau (AECB) before issuing customers with cheque books to ensure their creditworthiness.

The efforts are aimed at improving responsible lending practices by banks, according to a circular sent to financial institutions.

In the case of new customers, banks are limited to issuing a cheque book containing a maximum of 10 individual cheques. If no cheques are returned (unpaid) following six months, banks may issue further cheque books in line with approved procedures.

Banks are required to inform customers that returned cheques due to insufficient funds will be recorded with the AECB, negatively affecting their creditworthiness.

Banks are also encouraged to advise their customers to minimise the use of cheques and consider other payment methods such as direct debits and bank transfers.

In recent years, the UAE has increased efforts to abolish irresponsible lending. The AECB, which was launched in November 2014, was part of the plan to bring about transparency to the lending industry. It assembles a credit record of the UAE’s financially active residents using data from banks, telecoms and utility firms.

Last month, it introduced a mobile and online service that allows borrowers to access their credit reports digitally.

The country witnessed fewer bad cheques in the first five months of 2018 compared with the same period in 2017 and 2016, according to the UAE Clearing Cheque System, with the total number of bounced cheques totalling 515,000 with an approximate value of AED26.2 billion, and representing 31,000 fewer cheques.

The CBUAE also announced last month that UAE residents are required to submit their Emirates ID to banks or risk the suspension of their debit and credit cards.

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