Question: What are the circumstances under which I can request a deferment or restructuring of my credit card and loan instalments?
I have recently taken a pay cut due to the recent regional situation, and I am concerned about meeting my repayment obligations.
From a legal standpoint, what rights or options do I have in seeking temporary relief, and what factors will banks typically consider when assessing such requests?
Answer: Pursuant to your queries, the provisions of the consumer protection regulation issued by the Central Bank of the UAE are applicable.
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In the UAE, lenders are required to support customers facing financial difficulties by offering qualified credit counselling, encouraging open discussions about debt concerns, and giving fair consideration to alternative repayment options such as rescheduling or restructuring.
This ensures that borrowers are treated fairly and have a chance to manage their obligations in a sustainable way.
This is in accordance with Article 5.2.4.1 of Consumer Protection Standards, issued under Circular No. 8/2020 by the Central Bank of the UAE (the “Consumer Protection Regulation”).
Licensed Financial Institutions must provide Consumers with qualified credit counselling services on debt problems and encourage Consumers to feel confident about approaching the Licensed Financial Institutions and openly discussing their financial concerns. When approached by a consumer, the licensed financial institution must give reasonable consideration to alternative arrangements that could enable consumers to overcome their repayment/payment difficulties.”
If a lender and its customer agree on a new repayment plan, the lender must, within 10 business days, give its customer a written document explaining the new terms.
This must include a detailed payment schedule, showing how each payment will go towards interest/profit and the outstanding balance.
A lender must also inform the customer that details of any arrears (missed or late payments) will be reported to the credit bureau. This is in accordance with Article 5.2.4.4 of the Consumer Protection Regulation.
“Where licensed financial institutions reach an agreement on a revised repayment/payment arrangement with a consumer, the licensed financial institution must, within 10 complete business days, provide the consumer in writing with a clear disclosure and explanation of the revised repayment/payment arrangement. The Licensed Financial Institution will provide the Consumer with a copy of a detailed and revised payment schedule and a breakdown of how payments will be allocated to interest/profit and the outstanding balance owing. The Licensed Financial Institution must disclose to the Consumer that reporting relating to the Consumer’s Arrears must be shared with the Credit Information Agency.”
Lenders may carefully check a customer’s total debts, including both secured and unsecured loans, and verify this information with the Credit Information Agency before offering a new loan or restructuring an existing one. This is in accordance with the Article 7.1.4.8 of the Consumer Protection Regulation.
Licensed financial institutions must conduct a comprehensive due diligence on the consumer’s overall indebtedness by obtaining information on the consumer’s outstanding debt obligations, including both secured and unsecured financing. Verification with the Credit Information Agency must also be completed.”
In accordance with the aforementioned provision of the law, you may approach your bank(s) to request a deferment or restructuring of your credit card and loan instalments; where possible, your multiple debts can be combined into a single repayment plan with fixed monthly instalments.
However, the approval may depend on your eligibility and the bank’s assessment of affordability, including compliance with the Debt Burden Ratio (DBR) provided by the Central Bank of the UAE. However, the regulatory framework requires your bank(s) to provide you with fair and transparent options.
Applicable law:
Ashish Mehta is the founder and managing partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm are on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.
Disclaimer: The information provided above is intended for general guidance and does not constitute legal advice. It is recommended to seek formal legal counsel.
Source: Khaleej Times