Caught between a debt and a hard place

Nicholas Warner was arrested earlier this year for outstanding debts. Now he is stuck in Dubai and unable to work because his passport has been confiscated.

Nicholas Warner says his former bank, Emirates NBD, never told him that he had defaulted and would not give him a bill in writing.

The plight of Nicholas Warner, a British man who ended up homeless in Dubai because of outstanding debts, has raised important lessons for bank customers, many of whom may not fully grasp the strict laws in place to protect the country's lenders against defaulters. Mr Warner's story drew widespread attention this week when it was picked up by the media, including the BBC, that he was living rough as a result of his outstanding debts with Emirates NBD, the UAE's largest bank by assets.

Mr Warner was detained at the airport in January on his return from a holiday and had his passport confiscated. Without his passport, he has been unable to work and thus earn money to clear his balance. Mr Warner says the past seven months have been "like hell", adding, "If I was not involved in this myself, I would say it is ridiculous." The bank says it "pursued legal action against Mr Warner as he had defaulted on several payments".

"This is in accordance with the bank's rights under the applicable laws of the country," says a spokesperson for Emirates NBD. In addition, the spokesperson says that "in the last month alone, the bank has met with Mr Warner six times and has made him at least three tangible [settlement] offers". Experts say the seven-month dispute illustrates how a few mistakes can snowball from a small problem into a major one.

"We all find it really hard to get our heads around the fact that this actually happens to people," says Keren Bobker, a financial planner in Dubai and a columnist for Personal Finance. Ms Bobker said she feels badly for Mr Warner but notes that he - like all other bank customers in the country - are in a sense paying for the sins of the multitudes who skipped out on their debts in the past two years.

"[The banks] have had so many people running away and absconding, they have kind of run out of patience," she says. In the UAE, most local banks require a signed guarantee cheque from credit-card applicants before giving them a card or personal loan. If the cheque is presented and does not clear, they have effectively issued a bad cheque, which is a misdemeanour that can result in a fine, imprisonment or both. People who leave the country with credit-card debt then have their names flagged at UAE ports of entry, and can be arrested and prosecuted when they seek to re-enter the country.

The law is well-established, but banks are stepping up enforcement of late because of a large number of incidents where consumers fled the country to avoid paying their debts. According to a report by Orion Analytics, credit-card debt was the cause for two thirds of all skips in the third quarter of last year. Mr Warner's tale begins in January last year, when he moved to Dubai from the UK for a job in business development. He opened an account with Emirates NBD, which came with several credit cards.

He says he and his wife were not big spenders."It's not as if we lived the high life, bought a Porsche and a penthouse apartment; not at all," says Mr Warner. He says he and his wife lived in a one-bedroom flat in Dubai Marina that they rented for Dh63,000 a year - the bank officer who helped him open his account attended his house-warming party - and drove a Mitsubishi Pajero. They took several holidays but nothing extravagant, Mr Warner says.

When he requested a personal loan for Dh100,000, mostly to help furnish their flat, the bank agreed and even raised the limit to Dh170,000. He used the loan to pay off his rent, furnish the apartment and pay down the balance on his credit cards. "We used the money. There is no question about that at all," he says. His troubles started in July last year, when Mr Warner quit his job to take up a better offer with another firm and opened a new account with Standard Chartered for his salary transfers. He says he was told that his new employer was not able to set up salary transfers with Emirates NBD.

At the time, he estimates he owed about Dh15,000 to Dh16,000 on the credit cards. He says he left enough money in his Emirates NBD account to cover the payments due for several months and asked the bank to notify him as a courtesy if he needed to add more to the account. Even though he still had money in the account, he says it had been technically closed after his final salary was transferred from his previous employer.

He acknowledges that it was his responsibility to keep track of the account. "Stupidly, naively - whatever you want to call it - I did not keep an eye on an account that was closed," he says. For the next few months, he says he did not receive any communication from Emirates NBD except several calls about whether he wanted a car loan. He went on holiday in December to Spain for 10 days without an inkling that anything was wrong.

"On my return [on January 5], I was arrested at the [Dubai] airport, handcuffed and taken to the jail," he says. The charges: he owed Dh41,188 to Emirates NBD on his credit cards and his passport was confiscated as a result. He says he asked for a statement showing how the balance grew so markedly from Dh15,000 but did not receive one. He says the charges were only due to his credit-card debts and not related to the personal loan, which he acknowledges he owes as well.

The Emirates NBD spokesperson says the bank is not holding Mr Warner's passport, but that he relinquished it to the police as a condition of his bail. Mr Warner says he was initially told by a bank official on the night he was detained that if he paid Dh15,000, he could get his passport back and the bank would negotiate a payment plan on the rest. He turned over Dh10,000 in cash to the banker and drove home for an additional Dh5,000. On his return, the bank official told him that he could not get his passport back until he paid the full balance - now Dh31,188 after he paid the Dh10,000.

In the weeks - and then months - that followed, Mr Warner says he was told different versions of what he owed even though the bank would not supply a written statement documenting the extra fees and charges that had accumulated on the original debt. However, the bank's spokesperson says it sent him monthly statements as it does for all customers. His employer sacked him as he did not have a work visa or a passport.

In late February, he sold all of his furniture on Dubizzle to raise the Dh32,000 he says he was told by the bank would settle his debts. When he called the bank to notify that he was planning to settle the balance, he says he was told by another bank official that the new total was Dh58,000. The bank denies this and says Mr Warner's total debt is "substantially higher than what has been reported in the media".

Mr Warner instead gave the Dh32,000 to his wife to return home to the UK, which she did in March, while he remained in Dubai. After his apartment contract expired in April, he stayed with friends for several weeks, but eventually was forced to spend nights on a bench near Dubai Creek. Through a friend, he contacted several reporters who picked up his story, which became something of a sensation on YouTube and elsewhere online, attracting scores of comments. Not everyone took his side.

"To me it sounds like he is trying to blame it on the bank. I know people who have had problems with not paying debts and ended up in jail but they didn't blame it on the banks," one commenter wrote. But the majority of comments expressed sympathy for Mr Warner's plight, and many said they knew of others who had faced similar difficulties following the downturn. "I think the scepticism just might be aimed at the wrong quarter," one poster said.

In its latest settlement offer, the bank asked Mr Warner to apologise for his public statements, which he says he is reluctant to do. Nevertheless, his public comments have had at least one positive effect. Four businessmen contacted Mr Warner separately to offer him a chance to work. He has also been stopped on the street by people who have offered to help. He says he finds the support "touching".

Mr Warner remains angry at the way Emirates NBD handled his case, but says he is willing to cover his obligations. His main complaint is that the bank did not allow him to pay a percentage of his debt and provide him with a document that would have allowed him to retrieve his passport and thus go back to work. "If I am wrong, then let me be judged. But I said from day one, 'This is my problem'. I am prepared to pay, regardless of the circumstances. But I need to be working to pay."