I took out a loan and borrowed on credit cards to help pay for the delivery of my twins in April 2013 as maternity was not covered in my insurance at that time. The same year, my husband and I lost our jobs and I could not afford to pay the instalments, stopping the payments in January 2014. My husband then left me, leaving me alone with four children to raise. I found part time / contract jobs to keep my home running with help from friends before finding a permanent job as a researcher in October 2015, which pays me Dh16,000. I then restarted my payments to the bank, sometimes paying Dh1,000, sometimes less but they kept pushing me to pay more even though I could not afford it. The bank started calling me every day via a debt collection agency. They even called my employer, showed up at my office and threatened to file a case and get me arrested if I did not pay a lump sum to settle the debt. In February 2016, I offered to pay Dh32,000 by getting help from friends and selling all my jewellery. The bank refused to take the money demanding Dh50,000 instead. I could not raise that amount and told them to file the case against me so that I could fight the case in court. I probably owe the bank around Dh43,000, as the original debts were approximately:
Credit card 1: Dh11,000
Credit card 2: Dh13,000
Personal loan: Dh19,000
However, with interest, the debt has grown to Dh90,000. I later found out the bank had already filed against me and blacklisted me with the Central Bank, which has made it impossible for me to get a loan from anywhere else to settle the debt. To this day they email and call me up to 10 times a day. Their new debt collection agency has also contacted my employer and this time my company management issued a verbal warning that they will take action against me if the bank contacts them again. Is there a law that allows them to harass people to the extent that they start contacting the employers who have nothing to do with the liability? I have four children that all attend school, I live in a one-bedroom apartment and I look after my mother who has no other family back home in Pakistan. My salary barely covers my monthly expenses, which are:
- School fees for four children: Dh6,000
- Bus fees for four children: Dh2,000
- Expenses for running the home: Dh1,500 to Dh2,000
- Rent: Dh5,000
- Bills and my office commute expenses: Dh1,500
I am in no position to hire professional help and am now struggling to go to work because of the mental trauma associated with this debt. What do you suggest? SM, Dubai
Debt Panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
As a starter, speak to your employer's HR team to explain your situation so that they have a full understanding of your circumstances. The last thing you need right now is to lose your job because of predicament. Although you should have informed your bank that you would struggle to make repayments as soon as you lost your job, even now the bank should be sympathetic to your situation and support your efforts to pay back what you owe. You have already shown a commitment to become debt free by raising Dh32,000. Your bank needs to appreciate that in your position it’s unrealistic to raise another Dh18,000 at the current time, particularly if they can see the money coming in and out of your account.
While you should continue to speak to your bank to find a resolution, note that you are able to register a complaint with the Central Bank of the UAE – either online or through one of its branches. If you are able get yourself removed from the Central Bank blacklist, you should seek a consolidation loan. This would enable you to pay off your outstanding debt while providing breathing room given your monthly expenses. You are entitled to up to 20 times your monthly salary, but you must stick to the repayment schedule. A sustainable programme of monthly repayments will provide the smoothest path out of debt.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
I am rather cross that a bank is behaving this way. They should not be calling you multiple times each day. While they understandably want monies repaid, hassling anyone in this manner is simply not acceptable and I consider it unprofessional. I suggest making a formal complaint against the bank for unwarranted harassment via the Central Bank.
While you are legally in the wrong for not making payments, it is not acceptable for the bank to call someone’s employer. There is also a data protection issue if this debt collection company has disclosed any financial information to a third party, even if this is advising that there are arrears on an account.
All UAE banks are regulated by the Central Bank of the UAE and as such they agree to adhere to the guidelines of the Central Bank which has its own customer charter. Banks are expected to follow these guidelines, which include treating customers fairly and with courtesy. Contacting someone 10 times a day and calling their employer is contrary to these guidelines. The details for making a complaint about a bank's conduct can be found on the Central Bank's website.
There is also a voluntary Code of Conduct set out by the UAE Banking Federation that is intended to raise standards and promote trust. The bank in question has breached these guidelines too.
By missing payments and being in arrears you have broken the terms of your loan and credit card agreements so there will be consequences. I note, however, that in February 2016 you offered to make a substantial payment but that this was declined. While it was not the full amount it was significant and would have reduced the bank’s exposure. The reduction of the debt could have meant that the bank was able to reschedule the remaining debt so that the monthly repayments would be affordable.
Do you still have the funds to make a partial repayment? Do you have any other assets you could liquidate to repay the debt? Can any family members assist? Has your ex-husband made any contribution to this debt as it was jointly acquired? With four children to support, a judge in a Dubai court is likely to be lenient but steps need to be taken to make inroads on the debt as it will only increase.
Debt Panellist 3: Ambareen Musa, founder and chief executive of Souqalmal.com
No one should have to endure undue harassment at the hand of debt collectors. Debt collection agencies often try to arm twist you into paying off the debt, and some are notorious for using social embarrassment and threats as pressure tactics. Approaching your employer is one of many ways a debt collector can coerce you into repaying your debt.
Remember, it can be emotionally and psychologically exhausting to deal with debt collectors when you're facing financial hardships of your own. But, there is always a way out. In fact, your situation isn't as grim as you think it is. You earn a decent salary and your combined debt isn't enormous. You can remedy your financial situation, but you must be proactive, since delaying repayment will only penalise you in the form of additional interest and late payment penalties.
Just because you're now being chased by a debt collection agency, that does not mean you cannot approach your bank anymore. Try to deal with the bank directly, as much as you can. You can complain to the bank about the debt collection agency badgering you and jeopardising your employment, even though you have only been forthcoming and had offered to make a lump sum settlement to clear the debt. It is understood that your last negotiation with the bank was over two years back, but you can still reach out and negotiate with the bank to reach a new settlement or revised repayment plan.
If the lump sum offer doesn't cut it, you can request the bank to accept a partial payment and convert the remaining debt into a new loan with revised terms of repayment. Your priority should be to close the credit card accounts first. By using the lump sum cash to repay the outstanding balance on both the credit cards or by converting this credit card debt into a fixed-interest loan, you can get rid of the very expensive and constantly accumulating interest.
On the personal front, have you considered moving your family back home? Think of it as a temporary measure until you sort your debt situation out. Education costs and living expenses would be significantly cheaper back home, and even one year of this living arrangement can help you free up the cash you need to get rid of all your debt, for good.
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 firstname.lastname@example.org