News: Bad Cheques are still Bad News

Bouncing a cheque is still a criminal offence for expats in the UAE

There was a flurry of excitement in the local papers when there was announced on 1st January that the bouncing of security cheques would no longer be a criminal offence. The move was welcomed, albeit cautiously, whilst further clarification was awaited, but it has since been confirmed that this is not the case.

It has now been confirmed that this change will not apply to expats and bounced security cheques will still be accepted as valid evidence of criminal action in UAE courts.

The reports refer to the cheques that banks request when advancing loans so that in the event of default they could present them for payment and if they bounced the bank could then take criminal proceedings against the defaulter.

In a statement, the Higher Committee for Debt Settlement Fund for Nationals said. The mechanisms set by the fund will apply only to UAE citizens, and not others, and this includes the President’s directives to decriminalise [bounced] security cheques presented by UAE citizens to banks and financial firms”.

There were contradictory reports in the local newspapers immediately after the initial announcement with some stating that the ruling  applied to the expats in the UAE, who make up a majority of the population, but these reports have since been corrected.

Cheques are widely used in the UAE to underwrite credit cards, loans and to guarantee future payments. Unlike in many countries where bouncing a cheque is a, less serious, civil offence, in the UAE it is a criminal offence, with the result that numerous expats are jailed each year for bad debts. Many people feel that taking action against someone who is already in debt as putting someone in jail takes away any opportunity they had to earn the money required to repay the debt.

In October 2012, the authorities relaxed the penalties for Emiratis who write bad cheques and in November freed around 290 UAE nationals who were in prison for bouncing cheques. The Higher Committee for Debt Settlement Fund for Nationals has settled many of the debts built up by Emiratis.

In summary, the situation has not changed for expats living in the UAE and anyone taking out any loans, or building up any debts, must be aware of the serious consequences of defaulting.

keren@holbornassets.com

 

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About financialuae

A qualified and experienced Independent Financial Adviser based in Dubai, UAE. Professional and ethical. Freelance writer on personal financial issues & the On Your Side column in The National. Regular radio guest. Senior Partner at Holborn Assets LLC, Dubai, UAE.
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