The truth about leaving a debt behind in Dubai.
Common myths explained by the debt team at Detained in Dubai.
Unlike Western countries, the UAE treats debt as a criminal matter rather than a civil one. The result being that if a borrower is late with payments, they can be sentenced to jail for up to three years. However, the debt is not cleared because of this sentence, only the “criminal” act of not paying it/the instalments due. After the initial sentence the debtor is freed for thirty days to allow them to arrange payment of the money due. If they do not have the money to pay, a civil case is then taken by the creditor, and the debt victim is sent back into jail indefinitely, until the money is paid.
This doesn’t make sense to a Westerner used to the protection of bankruptcy laws. After all, if the debtor is in prison, how can they ever earn money to pay the debt? Unfortunately the Dubai banks think differently to their Western counterparts. Instead of seeing the debtor as an income source they think of them as a hostage that some wealthy relative may sell a property to set free.
HSBC UAE country head Abdulfattah Sharaf explains this rather chilling sentiment to the Arabian Business Magazine, where he tells us (about jailing debtors): “It has worked for us. People immediately get people to come and bail them out, and get the money in...(historically) it did work. In most cases it did work,”
Banks in Dubai, knowing they can have a defaulter jailed for missing payments do not feel the need to lend responsibly, like banks in the West do. Most expats will be familiar with getting between two and ten phone calls a day, six days a week, trying to sell them loans and more credit cards. Eventually even the strongest crack and take credit to finance their “Dubai Lifestyle.”
Sometimes the borrower’s circumstances change. People get ill, or fired. They can’t pay what they could pay before. But the banks are unwilling to negotiate. Why give a carrot, when they have such a big stick (jail) at their disposal?
There are Indian labourers who have been in jail for over a decade for debts as little as £1000. They have no hope of ever getting out of prison, barring the occasional intervention of an altruistic business man.
Suffocating. When the borrower’s circumstances change, UAE banks are ruthless and relentless.
Unsurprisingly then, the defaulter, knowing he or she faces potentially the rest of their life in a grim desert jail, often flees the country before the cell doors can clang shut on them. Many of these absconders fully intend to honour their obligations by restructuring their payments, but want to negotiate without a jail sentence hanging over them.
Are the debtor’s worries over when they reach their home country? Are they safe when they escape the reach of the Islamic banks and criminal justice system? At Detained in Dubai we regularly hear from people who took bad advice and paid severely for doing so. Often the advice came from knowledgeable seeming online forums, given by people promoting themselves as experts. This (probably well meaning) wrong advice can be dangerous.
The debt team at Detained in Dubai has made a list of the most common misconceptions regarding the plight of debtors who flee the Emirates.
The debt collection agency threatened me with Interpol, but I heard that Interpol are not allowed to chase debts.
Correct. Chasing debts is not part of Interpol’s mandate, However the UAE (coincidentally Interpol’s largest voluntary cash contributor, having donated $54 million last year alone) gets around this law by illegally reclassifying the debt as “fraud.” Interpol does not have to investigate whether the charge is real. They just list the debtor with a Red Notice, and if the debtor passes through an international border, they risk detention while the UAE is asked if they want to start extradition proceedings.
Isn’t it true that they don’t report debtors to Interpol if it’s under a certain amount?
UAE banks report people to Interpol for both small and large amounts of money. Some people never get reported for large amounts, some people get reported for a few thousand dollars. Some people get reported straight away, some people get reported years later, some never get reported at all. There is no way to predict what the banks will do. There is no standard “playbook.”
I have done the online Interpol check and my name does not come up. Does that mean I’m clear?
Interpol does have an online check page, but it does not work for UAE Red Notices. It is the decision of the issuing country whether or not to publish their wanted list publicly. The UAE choose not to publish theirs.
If you search for UAE Red Notices it comes up zero, even though they issue more Red Notices than any other member state of Interpol. You can see the Interpol check page here.
Should I use a UAE lawyer to negotiate with my banks?
Over the last decade, we have had hundreds of clients who first tried to use UAE based law firms to handle their debts for them. We have never once heard of any other outcome than the fees paid to those UAE firms being lost, and the clients being worse off than before they engaged those lawyers. The reported results being:
The UAE law firms took the clients’ money, and then gradually ceased communications of any kind with the client. To the point where the UAE law firm would eventually answer no email or phone call from the client.
The case was not progressed, and the creditors not contacted by the lawyer.
The banks continued to progress legal actions against the clients (including on a couple of occasions issuing Interpol Red Notices.)
There is no way to get the money back. The UAE lawyers are not bound by any kind of enforceable codes of practice. At least nothing that is effective and especially from a client who is outside of the UAE.
We have had a large amount of clients come to us after paying money to a UAE law firm. They have in every case had to accept the loss of their money to the UAE firm and start all over again with us.
I have been told that they can’t legally reclaim the debt in my home country.
Also untrue. This is a really common misconception, even told by otherwise knowledgeable debt experts. Thanks to the credit agreement the debtor signed in the UAE, it is relatively easy for the banks to acquire jurisdiction in the debtor’s home country and go after the defaulter’s assets. The UK in particular has enabled this process by signing a unilateral credit enforcement agreement with the UAE.
UK debt reclamation is often seen as a last resort by the banks because of the expense involved, and the uncertainty of how much they will retrieve. But this should be taken seriously by anyone who has built up savings or assets after leaving the UAE. Coyle White Devine are one firm regularly used in the UK by UAE banks to seize assets and savings from UK citizens. Another is IDRWW.
Isn’t the debt is wiped clean after 6 years?
This would be the case in most Western countries, but in the UAE the statute of limitations on debt is 15 years. This 15 years applies even in your home country because it was on the credit agreement initially signed in the UAE. Plus the UAE bank can extend the timeframe at will simply by asking a friendly judge in the UAE.
Didn’t they change the law in 2017 so that a bounced cheque is no longer a jailable offence?
Yes they did. The penalty for a bounced cheque is now a fine rather than a jail term. However, paying the fine does not clear the debt (only the criminal act of bouncing the cheque). And the debt still carries the jail term. Plus the bank can still take a civil case against the debtor for the cheque bouncing, and still have the victim sent to jail.
Didn’t they create bankruptcy laws in 2016 to protect debt victims?
Yes, bankruptcy laws were touted in the national newspapers as being a real step forward in the UAE banking industry and a means of safeguarding debtors. But the laws actually only cover businesses unfortunately (not private individuals). And they only apply to Emiratis.
I heard that I can avoid paying if I change my name by deed poll or get a new passport?
This is another one we hear a lot. It’s wishful thinking I’m afraid. A person’s new name and passport are digitally linked to their old ones. If someone is listed (with Interpol for example) they will still be arrested when passing through an international border, such as an airport.
Will they give up on me after a while if they don’t catch up with me?
This is unlikely. Many UAE banks say they prefer to go after a debtor many years later as the person may now be settled and have assets like a home or even a business that the banks can seek to claim. If many years have gone past, the original debt will be likely to have accumulated high interest and fees.
They won’t jail me, because how could I pay if I was in jail?
Do not allow yourself to believe this. The bank does not expect you to pay from inside jail. They believe that a wealthy relative will sell a house and bail you out. Even if nobody comes to bail you out, the UAE banks would rather keep a debtor in jail as a warning to other would be defaulters.
If I show willing and ask them to work with me in restructuring my loan, they will do so. After all, this way they get at least some money, right?
Generally UAE banks are entirely unwilling to negotiate or restructure. The debt is almost immediately passed to debt collection agencies. These agencies are notoriously unprofessional and ruthless. They are staffed by poorly educated and barely trained young men and women from the Indian Subcontinent who are paid a commission on how much money they can extract from the debtor. Their tactics include harassing not only the debtor, but also the debtor’s friends, family, new work colleagues and even customers.
The debt collection agents are often rude, semi literate, aggressive, and reportedly not always trustworthy. Debtors who say they have paid their debts in full to a debt collection agent have found, to their horror, that none of the money they paid was deducted from the actual debt. Instead it was swallowed up in suspicious “fees and expenses” claimed by the debt collection agency themselves. Dealing directly with these agents is not advisable for people who want to settle their debt situations.
I have an offer of another job in the UAE, is it safe for me to return and work something out with the banks when I get there? Surely they will be glad that I am ready to pay again?
Absolutely not. If you return to the UAE or even another GCC country, you risk being arrested as you arrive at the airport, and jailed until you have the whole amount ready to pay.
Even if the bank has said they will drop the case in order for you to return, it is not certain that they are being truthful. Many debtors have returned to the UAE, feeling safe because the bank told them this, but were in fact arrested as soon as they reached Dubai.
As well as the UAE warrant, there will be a wider GCC warrant, meaning that it you go to another GCC country (even just to change planes) you can be arrested and transferred to the UAE to face their justice system.
Qatar is still officially a member of the GCC. While there is a political standoff between Qatar and the UAE right now, this does not necessarily make it safe to travel to/through. And the two countries could solve their differences at any time.
What about the new debt decriminalization legislation of January 2020? Does this mean that people no longer get jailed for debt?
Observers of in the UAE banking industry believe that this new legislation is sadly likely to be only window dressing and is unlikely to absolve anybody’s actual debt.
Whilst yet to be confirmed, our banking contacts believe that this new law will be similarly ineffective for debt victims because:
It only applies if the client is inside the country when they ask for protection. Meaning that by applying for the help, the debt victim is putting themselves on the radar for a potential Travel Ban and/or passport confiscation.
If a debtor asks for help via the new legislation, there will then be a payment plan imposed (by a court appointed expert) that spreads the debt over a maximum of 3 years. If any payment is missed, then civil action will still available to the creditors, including jail terms, until the debt is paid. The victim’s passport is also likely to be held and a travel ban imposed, so that they may not travel until the debt is paid in full.
The debt being decriminalised is misleading. Yes the debt may potentially no longer carry a criminal penalty but the bank/creditor can still take a civil suit against the debtor. This suit is what enables the banks to continue jailing debtors. For example, since 2018 UAE bounced cheques have been decriminalised and are no longer an imprisonable offence from a criminal standpoint. However the creditor still has the power to sue in civil court and the debt victim can still be jailed. Most of the jail sentences and unfair treatment of UAE debtors do not come from criminal penalties, but from the bank taking civil action outside of the criminal justice system.
Our latest information on the 2020 UAE Personal Insolvency Act will be updated here as we find out more.
Ok then, what is the best way to handle the debt situation?
Really you need a professional to deal with your creditors and negotiate payment terms you can manage, while protecting you from unpleasant legal consequences. The professional or organisation should be based in a location that is trustworthy.
The good news is that as long as you are outside of the UAE and wider GCC, and in a country with debt protection laws, your situation can be safely fixed. For further, confidential advice, email our debt team on: firstname.lastname@example.org
Radha Stirling discussed debtors prison live on Facebook: