I am a former UAE resident, who left the country due to unmanageable debts. In 2000, I took a personal loan to help my family back in Sri Lanka. Then I had to go for credit cards as, after paying the loan installment, I did not have sufficient funds for my bills and day-to-day expenses in the UAE. In addition I had to pay for my higher education studies to secure my job and possibly get a promotion. From time to time I topped up the existing loan to pay off the credit cards. The first top-up was in 2012. However, my last request was rejected because my employer was not listed and by then I had already exceeded the debt burden ratio (DBR) limit. Until then I was unaware of the DBR and was spending almost my entire salary on monthly loan installments and credit cards minimum payments. I realised I had a serious problem that was only getting worse, so I approached each bank for assistance but they refused to help. I had no bad payment history, not even a single month's salary delay. I was left with no option other than leaving the UAE. I felt I could talk to the banks from outside the country as I did not want to be in a legal trap leaving behind my elderly mother and family without support. From day one my intention was clear: to pay back whatever I owe but of course within my capabilities. After leaving, I explained my situation to the banks and responded to their emails promptly. But I kept on receiving threatening emails saying that there will be legal cases against me and I will be notified to Interpol as I'm out of the country. I recently moved from my home country to Europe where I am doing a low-level job with a much lower salary than in the UAE. Now, I have been contacted by third party collection agents for my UAE debts. After explaining my current situation and requesting a suitable plan, they are coming up with settlement options that are way beyond my capacity. Currently my take home income after tax deductions is £2,100 (Dh9,948). The outstanding amount on the two personal loans is Dh230,000. The total outstanding on the seven credit cards is Dh160,000. As per my recent conversation with the banks they are willing to offer discounts if I'm ready to pay off upfront or in five to six installments. I can only agree on that if I settle one by one. My current monthly expenses are around £1,100 to £1,200. Now I'm very depressed and cannot focus on my day-to-day life. What would the punishment be if the banks proceed with legal cases and I come back to the UAE to face this? Can a lawyer in the UAE handle on my behalf? Also, how did the banks manage to offer me this much on loans and credit cards despite the DBR rules being in place? MI, Europe
Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
You have a long and complex loan history, which has clearly grown quite serious if it has caused you to leave the country.With seven credit cards and two personal loans, and your presence outside the country, consolidation is not a viable option. I understand you have spoken with the banks already – but if they have offered a discount on repayments it sounds like you have only discussed lump sum payments rather than a reasonable long-term repayment scheme. With your current salary, lump sum payments are not feasible, so let’s consider how to work out a long-term repayment plan instead.
What you need to do is create a repayment programme that is feasible, and which covers all your cards and financing debt under your existing salary. After living costs, you currently have around £900 (Dh4,270), which you can use every month to chip away at your total debt of Dh390,000. The plan should include all outstanding financing, including rates and names of lending institutions. This is then the plan that you need to send to each institution to gain their approval. The idea is to not wait for the banks to tell you what they want you to do, but to create a plan yourself that you are presenting to each institution that includes all information and is representative of your actual abilities to repay. Your plan could very well include a request to the banks to decrease or do away with rates completely, and will explicitly state how much you intend to pay each month to each card or financing, and for how long.
It is important to understand that most banks will have marked your financing down now as in total default and your accounts as inactive, meaning they don’t expect to have it repaid. So any initiative you can take to show you intend to repay will be considered positively by the banks, and will give them incentive to reduce or do away with the original rates. With no rates, or reduced rates, your monthly payment will actually contribute toward repaying your principle, rather than merely interest. With cards and financing as old as yours, the administrative costs for the bank to continue tracking what you owe can be burdensome, so clarifying your intentions will be welcomed.
As to your question about hiring a lawyer – the short answer is yes, it can be helpful to have someone on the ground in the UAE speaking to the banks on your behalf, but you must be mindful of the costs of hiring the lawyer. These are costs that are likely better spent on the loans themselves, and there is no obvious reason to think that a lawyer will be able to secure a better deal with the banks than you could yourself through consistent and transparent communication. If you do need someone on the ground for some reason you could consider granting a friend or family member power of attorney to speak to the banks on your behalf. The only other possible reason that dealing with a lawyer might be helpful is if he or she could create a contract between you and the banks showing that you are no longer in default, due to an agreed repayment plan. This might allow you to return to the country worry-free and secure a higher salary than your current position in Europe, thus allowing you to repay more quickly. But this would take some very careful planning and number-crunching on your part and is not necessarily the best option.
Lastly, you questioned how the banks could offer you so much financing despite debt-burden ratio rules. The short answer is that the credit bureau was not in place when you were taking your initial loans, so there was no way for the banks to understand your full financial picture, unless you disclosed all at the time of application. I can definitively state that today with the credit bureau in place, this would not have happened.
Good luck creating your repayment plan and pitching it to the banks. Remember not to overpromise to the banks what you are able to pay and by when. Continue to be clear and honest, and the banks will likely welcome your efforts to repay what you owe.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
The first issue I want to comment on is regarding the responsibility of the individual in respect of monies borrowed. Although banks should take more care when extending credit to individuals, people are not forced to take out loans or credit cards. When doing so they sign a legal agreement and are surely aware that they have to repay all money, in accordance with the credit agreements that they sign? How does a person who is borrowing money to supplement their income expect to repay this money? Time and again we see people who keep borrowing more and more with no real plans in place to repay it. Personal responsibility must be taken.
The UAE Central Bank implemented the debt burden ratio in 2011. This stated that individuals should only be able to borrow money where the total monthly repayments do not exceed 50 per cent of their income. Initially there was no central register of debts so individuals were able to conceal debts with other banks and thus exceed limits. The introduction of the Al Etihad Credit Bureau, which maintains a register of all debts, now means that it is far easier to monitor people’s total liabilities but there are still many cases where people have debts from before it was operating effectively and I suspect this is what we have here.
When people are in debt I would like to see UAE banks being more amendable and working with customers to come to an arrangement to repay debts. Making threatening phone calls and contacting family members is unethical and quite possibly illegal. MI is the only person liable for this debt. Yet again, I am disappointed to read that banks are acting in an unpleasant manner, as this is not condoned by senior management whenever I speak to them.
I note that there is a loan and seven credit cards, presumably with different organisations so that makes the situation much harder to manage than if there was just one creditor. MI may well be able to buy some time by making small payments on each debt – to demonstrate the intention to repay. This will need to be handled remotely as I would expect there to be police cases registered if payment has not been made for some time and that means that MI would be arrested on arrival in the UAE.
It may be beneficial to contact all of the banks, in one letter, explaining that MI wishes to repay all the debts but is only able to do so if permitted to pay one at a time. If the banks are willing to co-operate, they will all benefit and monies can then be repaid over time. They are able to suspend interest payments if they are being helpful and this would lead to a better outcome for all. Engaging a lawyer would be costly and add to the debt, so it is cheaper to deal with the banks directly and get them to agree to stage payments. If staff are unhelpful then the matter needs to be escalated to senior employees who have the authority to make decisions.
Debt panellist 3: Rasheda Khatun Khan, a wealth and wellness planner
We have to find a way to make debt repayment cleaner. We are facing an alarming number of people stuck between a conflict of morals. They are faced with two options; go to jail and fall into a legal case or run away. What does one do?
There are always the same underlying factors that cause debt; it comes from simply overspending on a regular basis then using credit cards to cover those costs. Eventually a loan is taken out to repay the outstanding credit card balances that cannot be cleared. Some months later the whole process begins again. More credit cards and more loans. Again, this cycle is because you are spending more than you earn. Of course this eventually gets to a stage where it becomes a huge problem. This is when the banks stop lending money to you. Now with the Al Etihad Credit Bureau banks can see total lending and over exposure is not possible. The problem area is for those already in debt.
You have taken the option to leave the country and you should be able to repay your debts. Look for an advocate who is based here to represent you. They can help stop the threats and try to negotiate the terms of payment you can afford.
Know your expenses and budget now. Be sure the amounts you propose are amounts you can afford as ongoing repayments. Are there any family members you can call upon for help. Do you have other assets like property that you can sell to raise cash? Become resourceful.
On this panel this week: Philip King, the head of retail banking at Abu Dhabi Islamic Bank; Keren Bobker, an independent financial adviser with Holborn Assets and Rasheda Khatun Khan, a wealth and wellness planner and the founder of Design Your Life
The Debt Panel is a weekly online column to help readers better tackle their debts. If you have a question for the panel, write to firstname.lastname@example.org.