Emirates NBD, Dubai's largest bank, is one of a number of local UAE lenders who have hired British and American debt collection agencies to chase expatriate defaulters who have absconded back to their home countries without settling their loan repayments.
“In response to a growing number of fleeing debtors, banks such as Emirates NBD, ADCB [Abu Dhabi Commercial Bank] and others have been increasing their recovery efforts by employing international debt collectors and enforcers,” Radha Stirling, a legal consultant specialising in the Middle East and founder of the London-based charity Detained in Dubai, told Arabian Business.
Stirling claimed that some of the third party agencies had begun using “intimidation and harassment” in order to recover the funds outstanding, including threats to issue Interpol notices against debtors, as well as harassment and threats of harm.
She advised expat debtors being targeted in the UK and US to do background checks on whether the collection agencies are authorised to use such tactics to recover debts and whether they are authorised to work on behalf of the banks they claim to be representing.
“Any third party claiming to represent a bank, should insist upon receiving confirmation of representation before entertaining any communication,” Stirling said. “In our experience, most debtors have acted in good faith and genuinely seek to reach a manageable resolution. Threats simply cause undue stress and do not change the situation and the debtor's ability to pay.”
While Abu Dhabi Commercial Bank declined to comment, an Emirates NBD official spokesperson issued the following statement to Arabian Business: “We would like to confirm that, like other banks, Emirates NBD works with debt collection agencies, within the legal rules and regulations of the jurisdiction where the bank uses these agencies”.
Debtors absconding is an unavoidable reality for all banks, not just those in the UAE, but in November a senior banking official said lenders in the emirate are working together to try to stem the number of small business owners fleeing the country with unpaid debt, a trend which had allegedly reached around AED5 billion ($1.4 billion) by that point.
Small and medium-sized enterprises (SMEs) have come under pressure amid a gradual drying up of liquidity in the banking system due to the weak oil price and slowing economic growth. As a result, some business people have chosen to "skip" the country, leaving behind unpaid debt, a situation that bankers say has grown significantly from previous years.
"We want to take coordinated action on risk management," UAE Banks Federation chairman Abdul Aziz Al Ghurair said. "The idea is to allow the customer to pay for his debt and stay in town if they have a good intention. If they don't have a good intention, then it is no good (the bank) spending time (with them), it doesn't help."
Current bankruptcy rules are considered by lawyers to be outdated and largely untested, with few struggling companies using the legislation. The cabinet approved a draft law in July 2015 but it still needs the support of the Federal National Council, the country's legislative body, and the president. Al Mansouri also said the UAE would set up a credit guarantee scheme to help reduce the risk of default for potential lenders. He didn't elaborate on the specific details of the plan.