Expats advised: Prepare properly if forced to leave debts in the UAE.
It is one of the enduring legends of Dubai. Supercars left behind at the airport to gather dust as high flying expats’ debt suddenly caught up with them in the crash of ’08. Dubai, known for high rolling lifestyle and tax free wages, also had (and still has) an underdeveloped judicial system, open to legal abuse and manipulation. They also treat debt as a criminal, rather than a civil matter and they jail debtors. Indefinitely.
Dubai’s economy today, while not the high octane monster of the early nineties is still powerful. Professional expats earn high tax free wages, live in luxurious, shiny towers, drive vehicles they only dreamed of before arriving in the desert city, and party like glitterati at weekends. The trouble is that these days it is fuelled by the murky credit industry. Banks give out loans with almost zero checks on applicants’ ability to pay. In fact they push obscenely hard to get as many loans out as possible. Most expats will receive 3 or 4 calls per day pushing credit cards and loans on them. Most people cave and take the credit. Their friends drive a Porsche/live in JLT/go to the expensive brunches on the Palm Jumeirah and it is difficult to resist. Others need loans to cover rental properties that may demand a year’s rent in advance, or to pay for hefty private school fees, deposits and bonds. Still others have had little choice when faced with unexpected medical bills.
With Brits, Americans and most Western nations we expect our banks to lend responsibly, and thanks to our credit laws, they do. So when a legal banking or credit institution lends us money, we feel safer to take it. In the UAE, no such protective laws exist. What keeps the banks confident in lending so freely is the fact they can send you to jail for missing payments.
Mostly expats take these loans in good faith, pay the instalments back, and there is no problem. Sometimes though, circumstances change beyond the debtor’s control. Illness or loss of employment for example. Suddenly the expat can’t pay and, knowing they are facing years of Middle Eastern jail, they leave before they are subjected to a travel ban that would result in them being held captive in the country, without the ability to seek employment inevitably leading to homelessness even amongst the most educated.
From the safety of their home country, many people still attempt to negotiate, to find a better repayment structure or some way they can meet their obligations. UAE banks don’t want to negotiate though. They employ unprofessional, aggressive debt collectors to harass debtors and illegally threaten them with Interpol and extradition. The lack of willingness to solve the problem or negotiate often leaves debtors frustrated, to the point where they give up and ignore the debt altogether.
Recently banks have begun chasing UK debtors when they return home through UK solicitors like Coyle White Devine, with a view to enforced bankruptcy. A UK solicitor acting for the banks said “they are aggressive and ruthless and difficult to negotiate with. Even with reasonable offers based on someone’s circumstances, they are vindictively seeking bankruptcy orders”
It is important when returning to the UK, that debtors are aware of their legal position and risks, even if they intend to represent themselves.”
Because of the complexity of enforcement procedures, solicitors should be instructed to ensure that a debtor is not naively entering an agreement that is detrimental and that they know their rights. Often a UK solicitor chasing debts will capitalise on the debtor’s lack of legal knowledge and secure an agreement which legally the debtor need not sign. Before negotiations begin, it is paramount to receive a breakdown of all monies claimed and to ensure that it is accurate before it can be legally established that there is a debt and before negotiations can even begin.
Many forums on the internet exist and are full of people giving each other inaccurate information. It is easy to become confused, to the point where debtors are not even sure whether their overseas debt can be locally enforced. Actually international debt enforcement is now relatively easy for the UAE banks. In some instances, where the banks have not been able to establish the whereabouts of the debtor, they have misused Interpol to locate the party, resulting in arrest and detention. UAE banks have a history of misusing Interpol in their dealings with debtors. They often try to have people extradited to the UAE to face jail time before going after them in their home country.
Radha Stirling, CEO of British based organisation Detained In Dubai says, “dealing with the situation in advance and preparing for the likelihood of the bank taking such actions can protect the debtor against unnecessary escalation. Employing a professional debt negotiator can ensure the best outcome in most cases. It is also preferable to resolve the issues before the bank employs a local UK lawyer to act for them and before they consider Interpol. This kind of forward planning can leave the debtor in a far better situation and position to resolve their issues as banks are more negotiable before they have taken the above steps.”
Stirling warns about the practicalities of having the debts enforced in the UK. “Often the debtor has been home for several years before UK solicitors are retained. Because the debtor has written off the debt in their mind, they may have assets in their name. A home, a car, maybe a business. With the original debt having been multiplied many times over (due to dubious charges and interest), the debtor suddenly faces becoming a target for bankruptcy proceedings.
“While there has been talk about decriminalising debts in the Middle East, this has not yet happened, except in a limited way for UAE nationals. Although Interpol requested the UAE to stop illegally using Interpol for debt collection and despite UAE media reports that they would stop the abuse in 2012, this has also not happened.”
Stirling added “The following year, 2013 was actually a record year for reported UAE Interpol abuse.”