The Debt Panel: 'Will my bank file a legal case for a bounced cheque?

The Dubai resident's lender submitted her security cheque after she lost her job and began making late payments

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In April 2022, I lost my job in the UAE. I have an outstanding loan of Dh229,000 ($62,355). I have been trying to find a new job but have had no luck so far.

I paid my April loan instalment on May 31 and this was reflected in my statement on June 9.

My gratuity of Dh45,888 was then credited to my account on June 23 and the bank deducted my loan instalment from it for May.

However, to my dismay, the bank then deposited my loan guarantee cheque on June 27, which was eventually returned because of insufficient funds.

I have never defaulted on a loan before in my 10-plus years in the UAE and I am worried that the bank will file a civil case against me even though my gratuity covered my loan payment for May.

I genuinely intend to honour my obligation and plan to return to the UAE if I can find another job.

I am currently outside of the UAE and have been emailing the bank, but they are not responding.

Can you advise me on what I should do in this situation? Will the bank take legal action because of the bounced cheque and is it possible to restructure the loan and payment plan? MJL, Dubai

Debt panellist 1: Steve Cronin, founder of DeadSimpleSaving.com

It is tough mentally when you have lost your job and cannot find another easily.

What makes it much worse is when you have debt. Taking out a big loan effectively puts your financial life in the hands of your bank. They are not going to be particularly kind, responsive or understanding.

When you lose your job, your bank is notified that the payment made by the company is your final salary and gratuity. That way, the bank knows that you are no longer working at the company.

Encashment of the loan guarantee cheque should be triggered by default: three consecutive months of missed payments or six non-consecutive months of missed payments.

It is worth checking the terms and conditions of your loan if you actually have a copy of them to see if there are any other default triggers.

To encash the cheque simply because you no longer have a salary seems unnecessarily harsh, particularly if you have been making your payments.

If your payments have been late, the bank may have tried to take your June instalment at the end of June and found insufficient funds.

First, clearly map out what was due when and what has been taken. Identify any missed or late payments, especially this year.

Track any correspondence with the bank by email, letter or phone. It is possible the bank tried to contact you and couldn’t because you were out of the country.

It seems that UAE banks rarely respond to emails. Instead, you need to call them and try to speak to someone senior who can actually make decisions.

Customers who have a complaint about their bank can register it with the UAE Central Bank's Consumer Protection Department. Photo: Central Bank of the UAE

If you are not making any progress with one person, try to speak to someone else the next day.

It is quite possible that the bank has filed a civil case against you, which would cause problems if you try to return to the UAE.

You should try to agree to a restructuring plan with the bank on the phone and convince them to waive any case they have filed — beware it may not be closed even if they say they will close it.

You may be able to find a job in another country and then use your salary to pay off the loan.

It is also important to have a clear understanding of what income you have now, if any, what assets you may be able to sell to raise some money and whether any family members or friends can support you to pay off part or all of the loan.

Ultimately, the bank wants its money back and a bounced cheque won’t ensure that.

If you make no progress with the bank after 30 days, you can contact the UAE Central Bank's Consumer Protection Department, although there is no guarantee they will be able to help you now that the cheque has been submitted.

Debt panellist 2: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

It is unfortunate that you recently lost your job, leading to irregular monthly repayments and resulting in the bank deciding to present your security cheque to clear the outstanding amount owed.

I am glad, however, that you are being conscientious and want to work towards settling your debts and return to the UAE once you find a job.

A security cheque is usually presented upon the default of three consecutive payments.

However, a bank or finance company can initiate action at an earlier stage if they feel the risk of default is high, especially given they would have noticed your end-of-service benefit in the account.

You could try calling the bank and requesting to speak to a senior official about your issue.

You should tell them the difficulties you have been facing and confirm your intention to pay the outstanding amount and close the debt as soon as possible.

The bank will most likely help you with several options in terms of settling or restructuring of your liabilities.

The bank will most likely help you with several options in terms of settlement or restructuring of your liabilities

R Sivaram,
executive vice president and head of retail banking products at Emirates NBD

You could make a request to pay the settlement amount over a few instalments so as to give you time to arrange the funds.

A senior bank employee could also confirm whether they have initiated any legal action against you based on the bounced cheque.

You can also explore the option of selling any assets that you may have, either here or back home, to see if you can raise additional cash, or if you can obtain some assistance from family and friends.

Based on this, it is also important to provide the bank with a proposed plan to pay off the outstanding amount. Keep communicating with the bank and keep a record of all your correspondence to date and going forward.

I wish you the best of luck with putting together a payment plan and agreeing to a mutually acceptable way forward. Hopefully, you will be able to close this matter satisfactorily in the coming months and return to the UAE.

Debt panellist 3: Felicity Glover, personal finance editor at 'The National'

I am sorry to hear that you have lost your job and have yet to find another one.

However, as my fellow panellists recommend above, it is important that you reach out to your bank to explain your situation and try to work out a payment plan that takes into account your current situation.

In other words, don't let the bank convince you to pay more than you can afford as this will affect your day-to-day living expenses, such as food, housing and other bills.

I would also suggest cutting back on any unnecessary expenses to boost your personal finances during this time — anything from streaming subscriptions to dining out and catching taxis.

It might also be possible to request a loan payment holiday, which will give you some much-needed breathing space and allow you to focus on finding a new job rather than stressing about how to meet your next loan payment.

Try thinking outside of the box when it comes to applying for a new job. While I don't know your skill set or what you were doing before you lost your job, there are numerous ways to work remotely these days, either as a full-time employee or even setting up a side hustle to boost your finances.

It is worth exploring as it can be done from anywhere in the world, which will enable you to continue paying off your loan without having to return to the UAE if that is your preference.

However, you would have to discuss this option with your bank, which may require proof of employment and salary, as well as updated personal details, for you to continue paying off the loan from abroad.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to [e-mail]