Debt and aggressive credit card selling among top UAE consumer complaints, says Central Bank

The financial institution listed five main issues in its 2018 annual report

DUBAI, UNITED ARAB EMIRATES, MAY 8, 2016. Stock photos of credit cards. Photo: Reem Mohammed/ The National (Job ID 18839) *** Local Caption ***  RM_20160508_CREDITCARD_08.JPG
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The five top consumer complaints raised by banking customers in the Emirates relate to debt, delays, aggressive credit card selling, as well as bank account and remittance issues, according to the Central Bank of the UAE's 2018 annual report.

The regulator said its review of the "thousands of visits and calls" processed by its Customer Contact Centre, found top concerns last year involved debt management, a refusal or delay by banks in issuing necessary documentation, aggressive sales tactics for credit cards and issues related to the opening and closing of accounts and remittances.

"The Consumer Protection Department (CPD) is addressing these issues with the financial institutions and where necessary will take enforcement measures,” the central bank said. “In addition to providing information to consumers, the centre works with the banks and their customers in an effort to encourage resolution of customer complaints.”

The UAE has ramped up its efforts to curb irresponsible lending and banking practices in recent years, rolling out a number of new regulations to strengthen consumer confidence in the sector. Al Etihad Credit Bureau, which opened in November 2014, also brought more transparency to the lending industry by assembling a credit record of the nation's financially active residents.

In its latest report, the central bank said its CPD department, created in 2017, has helped contribute to the “stability of a highly competitive financial market". The department’s mandate has gone on to include consumer education and awareness and strengthen regulatory oversight.

To move its agenda forward in 2018, the central bank added three new initiatives to strengthen its consumer protection framework. The first measure, a new regulation to manage dormant accounts, was rolled out on April 24. It set out a new framework for the control and protection of such accounts with rules for deposit accounts, unclaimed bankers’ drafts or cheques, unpaid dividends paid to shareholders and unclaimed deposits in safety deposit boxes. Previously, banks were only obligated to report the number of dormant accounts they held.

According to Al Tamimi & Co, a law firm, under the new rules if an account remains dormant and balances are unclaimed for a period of seven years from the date of the last transaction and the amount in the account exceeds Dh3,000, “banks should use the form prescribed by the regulation to transfer the funds to the Unclaimed Balances Account" at the central bank.

The second 2018 central bank initiative concerning consumers, established standards in the licensing and monitoring of the exchange business. The federal decree on anti-money laundering and countering the financing of terrorism, which came into effect on November 30, outlined stricter penalties for violations. These include: a warning, administrative fines between Dh50,000 and Dh5 million, a ban for a period of time, restrictions on management executives and licence cancellation.

Previously, the penalties did not include fines.

In June last year the central bank downgraded the licences of seven exchange houses after the companies violated regulations such as anti-money laundering rules. The exchange houses were banned from carrying out any transactions related to remittances or wage payments, the regulator said at the time.

The third initiative aims to improve disclosure procedures to consumers related to the costs and risks of borrowing.

In March the central bank amended rules on loans given out to customers, insisting that banks and financial services companies offer reduced interest rates when customers transfer a loan from one bank to another rather than increasing the repayment period.

Then in June, the regulator set a maximum limit on fees and commissions charged by banks, capping 43 types of charges on services such as personal loans, credit cards, car loans and home loans.

“Fee caps are being used as a tool to protect consumers from anti-competitive and unfair practices,” the central bank said at the time.

Other central bank initiatives last year include the regulator demanding banks carry out a credit check on customers at AECB before issuing a chequebook. In November, a central bank circular sent to lenders said UAE residents must submit their Emirates ID to banks to update their records or risk the suspension of their debit and credit cards.

In a further boost for consumers, the regulator’s annual report said it had hosted several public workshop sessions, in partnership with the Family Development Foundation, on financial topics to promote consumer education and awareness. Sessions tackled issues such as saving, how to budget for a family and the benefits and risks of using a credit card or personal loan.