The 971 Report

Bouncing cheques - still a crime in the UAE? And what does it really mean anyway?

The days of quaking with fear because you have accidentally bounced a cheque could be over soon, if UAE media hype is anything to go by.

Reports suggest the UAE Central bank is considering decriminalising bounced cheques for all residents – four months after a presidential decree lifted the penalty for Emirati borrowers.

While changing the law would be good news for UAE residents, it is not quite as straightforward as it seems. This is because the order, already in place for Emiratis, only relates to security cheques drawn against personal finance products such as personal loans, car loans or credit cards. So what will it mean if this order gets widened to include expatriates?

STILL COULD FACE TROUBLE

It means if you miss a couple of loan repayments and your bank cashes a cheque issued as loan collateral and that cheque bounces, you won't go to jail. But if they cash in a standard payment cheque and there is not enough cash in your account for the cheque to be processed, then you may be in trouble.

It may be an oversight on your part and some UAE banks will give you a grace period to get the funds in place – but don't take anything for granted. At the end of the day, under current law expatriates are still committing a crime if they bounce a cheque.

But there is a bigger issue here. The Central Bank of the UAE is not only considering widening this order out to all residents, but also decriminalising bounced cheques altogether – bringing the banking system in line with international standards.

While such a dramatic change in the law would be welcomed by all, the banks are allowed to be concerned.

Having no security cheque in place to cover defaulted loan payments could leave banks exposed and with no federal credit bureau to vet potential borrowers, it could reduce lending.

CREDIT BUREAU CALL


UAE nationals stopped facing jail for bounced cheques following a presidential decree in October and, according to The National, since then 1,000 cheque defaulters have been released from jail. With banks also saying there has been a rise in the number of Emiratis missing payments on unsecured lending, it is easy to see how problems might arise.

Now the banks are pushing for a federal credit bureau to replace the security cheque so that borrowers can be thoroughly checked. It will certainly be interesting to see what happens next. In the meantime, you can look at comparing bank accounts that suits your needs in terms of fees and charges

(Ambareen Musa is the founder  and Managing Director of the online comparison website souqalmal.com)

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