My case is not extreme although it’s heading that way, hence I am proactively approaching each bank to request a restructure as I am unable to keep up with my monthly expenses. My main issue concerns who the right person/department to speak to in the banks.
I fell into debt after losing my job in the marketing industry in 2015 when I already had credit card dues, car and personal loans. They were due to an accumulation of spending for my two children – no major purchases, just your standard expensive Dubai rents, utilities and other living expenses that come with raising a family. To get us through that period of job loss, we moved to Sharjah, I sold my car, a property in the Philippines and received financial support from family back home. My wife took care of daily expenditures and school fees. My monthly salary is Dh13,300 and my liabilities are:
Bank A loan: Dh74,315 with Dh3,613 monthly payments
Bank A credit card: Dh18,278 – over the credit limit
Bank B credit card 1: Dh24,128 – very close to the limit
Bank B credit card 2: Dh1,941
Bank C credit card: Dh24,000
Bank D credit card: (converted to loan): Dh36,700 with Dh1,700 monthly payments
I first approached Bank A (where my salary gets credited) equipped with a formal letter stating my restructuring request along with the cause of my financial difficulties and a table comprising my expenses against my income. But I have been passed around different branches of the bank. One branch sent me to the collections department where I was told I am not in default nor am I jobless, so they cannot help. Another officer checked my restructuring request and saw that my debt burden ration (DBR) is indeed above 50 per cent. He said they (the branch) must check with the collections department (as I am not in default yet) regarding what can be done. This loan had already been restructured before I lost my job, but my new role pays less.
For Bank B, I gave their collections department the same letter, asking for a settlement plan for one of my credit cards. The account manager said I needed to pay the outstanding amount of Dh3,000 before they can process my request. I managed to pay this but then the collections department called and said they don't have a settlement policy. Instead they can provide a full settlement of the outstanding amount (certain penalties waived) or a monthly payment of approximately Dh3,200 for eight months. I can only afford Dh1,000 a month which he outright rejected.
For Bank C, the collections agent called said he would place the request, different agents still call every day asking for payment.
I want to consolidate or restructure my loans to get my DBR down to 50 per cent but all of this is a challenge. How much influence or role do the collection agents/departments at the banks have? Are they the only and final decision makers? Unless there is another way, such as making a complaint to the Central Bank, the banks seem unable to support me. To make matters worse, my company is not listed. What do you suggest? RE, Sharjah
Debt panellist 1: Kunal Malani, head of customer value management at HSBC
It is commendable you took the effort to do the right thing and clear your debt.
That said, using this unsustainable high level of debt to fund what you termed “standard expenses” is what has got you into this situation. We strongly advice readers to be very careful about their personal levels of debt.
You have taken some good steps by relocating to Sharjah to reduce your cost of living, selling your car and also selling your property in the Philippines.
Given your current situation, you should consider consolidating your high interest bearing credit card debt into a personal loan with more manageable monthly installments. This is what you have being trying to do.
The organisation structure and policies differ across banks and therefore we can’t give you a prescriptive answer.
That said, banks are open to working with customers who are above the 50 per cent DBR limits and facing financial hardship to help them manage their debt levels.
If you try to approach senior management in the retail banking department, we think you would be able to make progress.
Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com
You mentioned at the outset that the high cost of living in Dubai is what landed you in debt, so that's what we should address first. Given your current financial situation, you should carefully consider if you can afford to have your kids here in the UAE. The high rent paid towards a family home, school fees and other expenses of raising kids, are all eating into your salary and leaving you unable to meet your debt obligations. Consider sending the kids back home to the Philippines to live with the grandparents if that's a feasible temporary solution. Together with your wife, you can focus on repaying your debts and fixing your financial situation here, for good.
When it comes to consolidating your debts, aim to consolidate at least your loan and some of the credit cards into one single loan? Start with your primary bank (Bank A) and see if they agree to this. You can also try to negotiate debt consolidation with the other banks you have credit cards with or a different bank, provided you meet the eligibility criteria and are willing to transfer your salary to them.
Repaying your credit cards should be your top priority because late payment penalties and high interest rates will multiply your current debt and make it even more unmanageable in the future. With a lump-sum amount in hand, you can negotiate with the card providers to immediately settle the debt and waive off any penalty interest and fees. Remember to start the negotiations with the original amount due. During this whole process, make sure you keep a record of all your communication with the banks.
Now, if you fail to negotiate a favourable solution with the banks, you can also leverage the guidance of experts. There is free legal aid available at the Philippine Embassy in Abu Dhabi as well as the Philippine Consulate in Dubai. Lawyers from Gulf Law who have partnered with the diplomatic authorities, offer free legal advice and counselling to expats struggling with debt in the UAE.
The Central Bank of the UAE urges residents to first take up any disputes with the bank in question, and to try and settle them with the bank directly. However, If you still find that the banks are not willing to have a reasonable discussion with you, or if the collection agents harass you over the phone, you can lodge a formal complaint with the central bank. The process to do so is quite straightforward. You can fill up an online complaint form available on the central bank website, call their toll free number 800 22823, or personally visit one of their branches.
Debt panellist 3: Keren Bobker, an independent financial adviser with Holborn Assets
RE is trying to do all the right things to manage debts but few banks in the UAE seem to have a robust system in place to deal with people at this stage of debt management.
There are total outstanding debts of Dh179,362, which although high compared to the salary, could be affordable if the monthly payments are less than they are currently. This could, theoretically, be achieved with a consolidation loan to pay off the credit cards in full. Interest rates on credit cards are higher than for personal loans. We haven’t been told the actual monthly repayments on the credit cards but rescheduling the debts may help him both reduce the outgoings and actually start repaying the debts.
I suggest RE approaches his bank again to ask if they would consider increasing the amount of his personal loan to repay other liabilities. He should know the rate of interest payable on the current loan, plus those payable on the credit cards, so can demonstrate the sense in this solution. He will need to point out to the bank that although they would be lending him more money the reduction is overall liabilities would reduce the risk of default.
The fact that he has not yet defaulted on the existing debt with the bank should be pointed out as positive and he needs to explain his wishes to meet all the liabilities.
The general bank branch staff are unlikely to have the authority to make such decisions, so it is not uncommon for such requests to be rejected. RE needs to make an appointment to meet a more senior figure, who is in a position to agree rescheduling. Putting together a proposal that shows consolidation make sense, with a monthly budget that demonstrates this, should support his case.
On this panel this week: Kunal Malani, head of customer value management, UAE and Mena at HSBC Middle East; Ambareen Musa, founder and chief executive of financial comparison site Souqalmal.com and Keren Bobker, an independent financial adviser with Holborn Assets
The Debt Panel is a weekly online column to help readers tackle their debts more effectively. If you have a question for the panel, write to firstname.lastname@example.org.