UAE banks banned from selling by phone

The Central Bank of the UAE has banned banks and finance companies from selling loans over the phone.

The Central Bank of the UAE has banned banks from selling loans by phone. Ryan Carter / The National

Banks have been banned from calling customers to market loans and other services as the Central Bank clamps down on bad practices in the financial sector.

Officials say the ban, which extends to finance companies, follows a flood of complaints to the regulator from people accusing banks of trying to sell products in a misleading way.

The directive will affect many banks and financial services companies that seek business by phone.

Consumers regularly harassed by unsolicited calls from sales staff have welcomed the step.

The clampdown is the latest demonstration of the regulator's tightening of financial rules after the global economic downturn.

Many bank representatives were in the habit of calling targeted customers directly by phone, "causing such customers a lot of disturbances, which also gives a negative impression about the status of UAE banks", the Central Bank said.

"Therefore, [the Central Bank] has decided to prohibit marketing bank loans and other services offered to individual customers through direct contact by telephone."

The regulator issued its instruction in a circular to banks and finance companies dated Sunday.

Mohammed al Mutawa, 29, an Emirati pilot working for Presidential Flight in Abu Dhabi, said salespeople on the phone had offered him loans at up to 24 times his salary.

"This is a great decision," Mr al Mutawa said. "Banks will not exceed their limits by being intrusive. They call me every day, not just my bank but others when I'm abroad and roaming. It can be annoying."

Companies violating the latest directive face the possibility of fines, said Saleh al Tenaiji, the senior manager of the Central Bank's banking supervision and examination department.

"We have the tools to take action against any bank or finance company not complying with the instructions," Mr al Tenaiji said. "We are saying stop marketing the products on the phone. So many customers call us and say they have had calls from tele-salespeople trying to sell products on the phone without giving the correct information about the product."

The regulator is encouraging companies instead to take the time to explain to customers in person the details of products they are selling, he said.

The ban would make it difficult for banks to approach customers, said Raj Madha, an analyst at Rasmala Investment Bank in Dubai.

"It will cut down competition from smaller players who use call centres to market products to potential customers," Mr Madha said. "It could be a useful element in improving the relationship between banks and customers."

He said he expected the Central Bank to fine-tune the directive after receiving feedback from banks.

The ban comes just weeks after the Central Bank announced limits designed to curb excessive service fees. A rise in complaints from customers to the regulator was behind those rules.

The regulator's previous action also included caps on the size of the loans banks could extend to customers.

Other regulators around the world have taken steps to curb marketing approaches in their financial services sectors.

Many countries have rules for the financial sector discouraging or banning the practice of cold-calling, which involves companies making unsolicited marketing calls.

In the UK, the Financial Services Authority prohibits unsolicited marketing calls unless the company involved has a relationship with the customer in which the customer expects to receive promotions.