By Shane McGinley
Some lenders may also look for power of attorney so they can foreclose on defaulters
UAE mortgage lenders may be reluctant to lend to British expatriates, with some considering demanding power of attorney so they can foreclose on defaulters’ properties, after an Abu Dhabi bank failed in its attempt to extradite a British woman who had defaulted on her mortgage and absconded to the UK.
The UAE initiated extradition procedures against former UAE resident Amanda Allen, who defaulted on an AED2.38m (US$647,989) mortgage with Abu Dhabi Commercial Bank (ADCB).
Allen took out the mortgage in May 2008 but ran into difficulty making repayments in 2009. ADCB attempted to draw down an undated security cheque Allen had supplied when she took out the mortgage. When this bounced, she was later convicted in her absence and sentenced to three years in jail for cheque fraud.
The UAE government’s extradition request was passed by the UK Home Office but was thrown out by the magistrate court. An appeal by the UAE government in the High Court was dismissed in June 2012, but some financial experts have said this may set a precedent for other UAE lenders to be reluctant to offer mortgages to British expatriates.
“[The banks] may become more reluctant to make loans to people who would be able to depart to a jurisdiction from which they would not be plucked back,” Craig Shepherd, of London-based law firm Herbert Smith LLP, told The Telegraph newspaper.
Some lenders may also look for heightened levels of security in order to protect themselves against defaulters.
“I think the banks will start doing more innovative things,” Omar Rahman of Noor Investment Group was quoted as saying in the report. “We are considering getting the expat to provide us with a power of attorney so that we can take immediate steps to at least foreclose on the property,” he added.
However, Emirates NBD, the UAE”s largest lender, dismissed these claims and said the case would not have any impact on lending policies.
“Cases like this are rare, and do not affect credit underwriting policies of retail banks in the UAE… We do not differentiate our credit underwriting standards by nationality, and do not intend to do so," a spokesman reportedly said.
The Allen case is one of a handful of extradition cases which the UAE government has filed with the UK’s Home Office in recent months. However, the majority of the cases have been rejected and a London-based solicitor who worked on a similar case said this was likely to dissuade UAE authorities pursuing more of such cases against UK expatriates who absconded and defaulted on loans in the UAE.
ADCB’s spokesperson declined to comment on the Allen case when contacted by Arabian Business.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
The UAE needs to understand that these laws do not apply in developed nations like UK and also needs to take a leaf out of their books and apply similar here.
How is it someone's fault if they lost their job and can't make any payments anymore? The Govt. here doesn't provide any financial help or anything similar to support job less people. As a matter of fact as soon as you loose your job, you are required to pack up and leave within a month!! so all of this needs to be looked at, otherwise these stories will continue.
Correct if I am wrong but in the case of a mortgage - a bank takes a lien on the property that is the subject of the mortgage as security? You seem to aviod clarifying this in your article
Aren't undated security cheques like this supposed to be illegal according to the central bank anyway...so why is the bank not in trouble for trying to cash a cheque it knew was going to bounce...why this practice is comman place in the UAE is beyond me....if the banks were reasonable people would renegotiate terms like in other countries, here people live in fear so just abscond, it's a no win situation all round.
What credit underwriting policies , known fact is that the banks were handing out cash to everyone and anyone without a shred of credit policy or any moral ethos .
Many companies and entities in the G.C.C have not paid their dues and are going on record saying so .
Nobody with a shred of common sense has any sympathy with the U.A.E banking system .
This seems to be the usual approach to solving problems in the Gulf - blanket bans based on nationality.
The reason why the UK authorities have denied extradition is because of the fundamental backwardness of the UAE's debt law. A far smarter and more profitable move for UAE banks would be to campaign for debt law reform AND conduct due diligence. When I started work in the UAE, I was offered loans that were double my annual salary, no questions asked. When I bought a car, the bank attempted to loan me nearly 500,000dhs - for a car that wasn't even 10% of this amount. It's very easy to blame those who skip but the sad truth is most banks just don't seem to know what they're doing.
The British ruling also sets a precedent. You can guarantee now that any other EU country will also come to the same decision, so if UAE banks go down this route, suddenly no European will get a loan anymore - and ask yourself, what will happen to the UAE economy then when all the Europeans leave.
UAE judicial system has not developed since the 80's.
It is based on outdated egyptian governance and hence the mess everyone finds themselves.
Am really surprised that adcb actually thought they had a chance in the UK. Think adcb lawyers took the bank for a ride as well.
Good one, Doug!!
Here's another thing (sorry AB and its readers!)....
...we already know that most banks are incapable of doing even really basic things, like updating their address records, mailing out ATM cards in a timely manner, answering the phones....you know, the really, really basic stuff.
I'm sorry, but would you really trust an incompetent bank with YOUR power of attorney? I for one wouldn't want any bank in this country having the ability to use my money - you'd ring a call centre to make a bank transfer, and you'd come home to find they'd sold your house and car to someone else because they misunderstood!
The problem is that economies depend on the flow of capital. The UAE doesn't have anything like a direct debit or standing order system. That means that very basic life tasks such as renting accommodation or buying a car require you to take out a loan. For years the banks have been complicit in this because they make a fortune out of loaning people huge amounts which they then have to spend on a year's rent, rather than developing a banking system based on customer needs.
If banks stop loaning to nationalities on the basis they won't extradite, that means all those people won't be able to rent homes (killing the property market stone dead instantly), they won't be able to buy cars (killing off the car market) and then they won't be able to spend money in the malls etc. After Emiratis, European expats are the biggest spenders in the UAE. It'll cost the banks far more in the long run to stop loaning.
" what will happen to the UAE economy then when all the Europeans leave."
Hmmm, I wonder what will happen. Gulf nationals are the ones occupying hotels, buying consumer goods, placing deposits in UAE Banks, hmmm.
Let's try it and find out Doug, that would be interesting.