Lost your job? How UAE borrowers can renegotiate loan repayments

Question: If I lose my job, what options do I have to negotiate the repayment terms of my outstanding loans with UAE banks? Can payments be deferred?

Answer: Pursuant to the queries raised, 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 borrowers 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 borrowers with qualified credit counselling services on debt problems and encourage borrowers to feel confident about approaching the licensed financial institutions and openly discussing their financial concerns."

"When approached by a borrower, the licensed financial institution must give reasonable consideration to alternative arrangements that could enable borrowers to overcome their repayment/payment difficulties."

If a lender and a borrower agree on a new repayment plan, the lender must, within 10 business days, give the borrower 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. The lender must also inform the borrower 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 borrower, the licensed financial institution must, within 10 complete business days, provide the borrower in writing with a clear disclosure and explanation of the revised repayment/payment arrangement. The licensed financial institution will provide the borrower 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 borrower that reporting relating to the borrower’s arrears must be shared with the credit information agency."

The lenders may carefully check a borrower’s total debts, including both secured and unsecured loans, and also verify this information with the Credit Information Agency before offering a new loan or restructuring an existing one. This is in accordance with Article 7.1.4.8 of the Consumer Protection Regulation.

"Licensed financial institutions must conduct a comprehensive due diligence on the borrower's overall indebtedness by obtaining information on the borrower’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 consolidation of loans or restructuring of loans. 

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 ensures that banks should provide you with fair and transparent options.

Applicable law:

Consumer Protection Standards, issued under Circular No. 8/2020 by the Central Bank of the UAE

 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 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.