If you fall behind on credit card payments in the UAE, it could quickly escalate into a serious legal matter, with the risk of court cases, default, or even a travel ban. Many residents face difficulties managing unexpected expenses, but understanding the legal implications and options available could help prevent these issues from spiralling.
How Default is Defined
If you miss one or two payments, most banks will issue reminders or apply late fees. However, according to Article 4(4) of the Personal Loan Agreement format approved by the UAE Central Bank, if you miss three consecutive or six non-consecutive monthly payments, the account is considered to be in default. At this point, the entire credit card balance becomes immediately due not just the overdue amounts. The bank does not need prior notice or a court order to demand full repayment.
Credit cards in the UAE are treated similarly to personal loans under the law. When you apply for a card, the bank often requires a security cheque equal to your credit card limit. If you default, the bank can deposit this cheque to cover the balance.
Legal Consequences of Default
If the cheque bounces due to insufficient funds, the bank has the option to file a case under Federal Decree-Law No. 50 of 2022 (Commercial Transactions Law). If your outstanding balance exceeds Dh10,000, the bank can also request a travel ban under Article 324 of Federal Decree-Law No. 42 of 2022 (Civil Procedure Code).
This travel ban, once approved, prevents you from leaving the UAE until the debt is cleared or settled. However, the bank must prove the debt is serious and due before the court can issue the ban. The court evaluates the case and determines whether the order is justified.
The travel ban can be lifted in several situations:
– The bank agrees to cancel it in writing.
– You pay the debt or deposit the amount with the court.
– You provide a valid bank guarantee or an approved guarantor.
– The bank fails to act within the legal timeframes (8 to 30 days).
– Three years pass without enforcement action.
– Authorities confirm your stay in the UAE is illegal, and you face deportation.
If the travel ban is later found unjustified, the court may require the bank to post a financial guarantee.
Options to Avoid Escalation
If you are struggling to meet your payments, contact your bank early. Most banks are willing to work with you to avoid legal action. You may be able to request:
– Restructuring your debt into smaller, more manageable instalments.
– Delaying or reducing interest payments.
– Waiving penalty fees.
If your situation is particularly severe, consider applying under the UAE Insolvency Law. This allows individuals to restructure their debts legally without facing criminal penalties. Although banks are not required to approve such requests, showing a willingness to cooperate can help prevent the issue from escalating further.
If no agreement is reached, the bank may file a civil case to recover the debt. If the court rules against you, the bank can initiate execution proceedings, which could involve asset seizures, salary deductions, or further travel restrictions.
Staying Safe
Missing a few payments is not a crime in the UAE, but failing to address your debt could lead to significant financial and legal consequences. The law is designed to protect both banks and borrowers, but it moves swiftly once a case is filed.
To avoid complications:
– Keep proof of all payments.
– Verify your legal status before travelling.
– Contact your bank as soon as possible if you are facing financial difficulties.
The earlier you act, the more options you’ll have and the less likely you’ll face legal issues or travel restrictions.
