Bounced cheques in UAE: new rules 'a progressive step for the justice system'

Imposing fines rather than jail sentences will ease fears for those with heavy liabilities, reduce the number of absconders and encourage banks to restructure debts, experts say

Attorney Diana Hamade of International Advocate based in Dubai, United Arab Emirates poses in her new offices on Tuesday, Oct. 16, 2012. Photo: Charles Crowell for The National
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Financial and legal experts in the UAE called the decision by Dubai Courts to issue fines instead of jail sentences for bounced cheques a “step in the right direction” to ensure those in chronic debt can resolve their issues.

Under a new criminal order issued by the Dubai Attorney General Essam Al Humaidan, a range of minor offences – including bouncing cheques and failing to pay rent – will no longer be put through the court system and instead be treated as a misdemeanour subject to a financial penalty.

The new ruling, which will come into effect in December, means those responsible for bounced cheques of up to Dh50,000 will be fined Dh2,000, while those who bounce cheques of between Dh50,000 and Dh100,000 must pay a Dh5,000 fine, with a Dh10,000 fine for cheques between Dh100,000 and Dh200,000.

Diana Hamade, a lawyer and the founder of International Advocate Legal Services, said the move "relieves people of the fear they have been subjected to" in the past when a bounced cheque was penalised by a jail term.

She added that she was among those “advocating the decriminalisation of bounced cheques due to the wording of the provision in the penal code related to the offence which presumes bad faith at the time of issuing the cheque”.

“The fine penalty is quite sufficient since the legislator obviously did not want to go all the way to decriminalise such offences and render them tortuous offences entailing civil damages," she said.

Ms Hamade added that in the past the law had been “misused by many to blackmail others by filing complaints with the police and withdrawing them after receiving payments”.


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Michael Routledge, who runs the debt advice site to help chronic debtors find solutions to their credit woes, said the new ruling “is definitely a step in the right direction”.

Mr Routledge said many of the debtors who contact his site for help are worried about going to jail.

“The threat of going to prison for the inability to cover a cheque often can make people flee the country, with this new ruling there is a good chance that people will instead stick around to settle their debt,” he said.

“The banks do not gain anything from having someone sent to jail, as they have almost no way of getting their money back once this process is under way. This step will hopefully push lenders to work with consumers to help them restructure their debt.”

Debtors welcomed to the news, although they had concerns over how the new order will be implemented.

Manuel, a logistics coordinator from the Philippines, owes Dh185,000 on nine debts with seven banks. He and his wife bring in a joint income of almost Dh12,000.

“This is good news for us. My only question is, if the defaulter paid the fine imposed, will the loan be closed or can banks file a civil case for the repayment of the loan?” said Manuel, who also wanted to know if travel bans imposed on debtors going through the court process would also be lifted.

The Dubai resident, said the new ruling may stop banks threatening him with jail, but added that it would not stop the threats completely.

“The harassment I have received from collection agents has been offensive and it is demoralising; even thinking of what they said is too painful to bear.

“I wish that financial institutions also are ready to offer a solution that can be met by the defaulter as per his/her capability to repay. Until now, I am struggling to repay my debt and cover my basic needs as almost all my salary is going to repayments.”

Abu Dhabi, United Arab Emirates. May 15, 2017///

Keren Bobker, The National's on Your Side columnist and an independent financial adviser with Holborn Assets in Dubai (a debt panellist). The Debt Panel - One Year On. Abu Dhabi, United Arab Emirates. Mona Al Marzooqi/ The National 

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Reporter: Alice Haine
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Keren Bobker, an independent financial adviser with Holborn Assets, said the change in how bounced cheques are handled will offer debtors some "breathing space". Mona Al Marzooqi/ The National

Keren Bobker, an independent financial adviser with Holborn Assets, said too many banks threaten people unnecessarily when payments are missed and that better results could be obtained by working with those in trouble.

“If debt collectors are no longer able to threaten people with the consequences of a criminal case, then they will have to find other options, and I hope that will mean offering solutions instead,” said Ms Bobker. “If someone is scared of going to prison, they will often avoid speaking to the bank for fear of the consequences. If they know that can’t happen, at least for smaller debts, then there can be constructive dialogue.”

Ms Bobker said the new order would offer those in chronic debt “a little breathing space”, although a fine on top the unpaid debt will “not make matters any easier”.

“Often a cheque will bounce as a person has not been paid themselves, rather than for a deliberate reason, and I think many residents have felt that the consequences have been a little harsh, especially when there are extenuating circumstances.

“In most countries bouncing a cheque, especially for a relatively small amount, does not result in a criminal case and this is yet another step to fall in line with global financial practices, as well as allowing the legal system to focus on the more serious cases,” she added.

Mario Volpi, the chief sales officer for Kensington Exclusive Properties, said the ruling will help to modernise the real estate business.

"The whole rental system is due an upgrade, starting with the tenant's deposit. In time, this will no longer be paid directly to the landlord but instead paid into an escrow account to be used by the landlord under a controlled manner when appropriate," he said.

"Further down the line, tenant referencing and credit checks must also come into play, eliminating rental payments in one go to more manageable monthly payments, but I stress that this may still take some time before it happens."

However, Mr Volpi did not expect the measure to increase the number of people intentionally bouncing cheques.

"I’m sure the initial reaction from landlords was one of dismay, given the severity of writing out a cheque that then bounces has now been removed," he said.

At Dubai's One Day Court, set up to handle minor cases earlier this year, Ayman Abdul Hakam, its head, said fewer debtors will need to hire a lawyer for debt cases, estimating that 35 to 45 per cent of cheque-related cases will drop in the first month.

Ms Hamade said: “This move will be a relief for misdemeanour court judges since they are in fact overwhelmed, but the prosecution judges together with the police would also need to have a time frame set for such cases."

However, she said that now that the “outcome is limited to a fine, things will definitely be less ambiguous and the certainty which is what is sought by all, including lawyers, is what will be more prevailing, which the legal system especially the criminal one in the UAE will benefit from".