Facing financial hardship and struggling to meet your credit card obligations can be a stressful experience. In the UAE, credit card debt is treated under regulations similar to personal loans, and understanding your legal options and potential consequences is crucial.
What Happens If You Default on Credit Card Payments?
When you receive a credit card, lenders often require security, such as post-dated cheques, along with a signed agreement detailing the terms and conditions. Missing payments can have serious implications:
- Event of Default:
- Missing three consecutive payments or six non-consecutive payments is considered an event of default.
- Under Article 4(4) of the Personal Loan Agreement (UAE Central Bank’s Notice No. 3692/2012), the lender can demand the entire outstanding amount immediately, without prior notice or court ruling.
- Cheque Dishonor and Legal Action:
- If the lender presents the post-dated security cheque(s) for collection and they are dishonored due to insufficient funds, the lender can file an execution case under Federal Decree-Law No. 50 of 2022 on Commercial Transactions.
- Travel Ban or Court Action:
- If the outstanding balance exceeds Dh10,000, the lender may seek a court order to impose a travel ban as per Articles 324 and 325 of the UAE Civil Procedures Law (Federal Decree-Law No. 42 of 2022).
- The lender can also file a payment order or civil case to recover the debt. If the court rules in favor of the lender, further enforcement actions, such as a travel ban or an arrest warrant, may follow.
What Should You Do?
- Contact Your Bank:
- It is highly advisable to communicate with your bank or financial institution to explain your financial difficulties.
- You can request relief options such as installment payment plans or a waiver of penalties. The bank has the discretion to approve or deny your request.
- Consider Insolvency Proceedings:
- If you are unable to settle your debts, you may explore insolvency proceedings under the UAE Insolvency Law, which can provide legal relief and help you manage your financial obligations.
Key Takeaway
While lenders have the right to pursue legal actions, including the collection of cheques, court cases, and travel bans, you may still have options to mitigate the situation. Open communication with your bank and exploring insolvency laws can help you navigate through financial hardship while minimizing legal repercussions.
News Source: Khaleej Times
