Question: I’ve recently left my job and have some existing loans and credit card debts. Can my bank seize these amounts from my final settlement payment?
Answer:In the UAE, personal loans granted by financial institutions are governed by the Central Bank of the UAE’s Notice No. 3692/2012, which outlines the General Terms & Conditions and the approved Loan Agreement formats from the Emirates Bank Association. When a borrower accepts a personal loan, they enter into a loan agreement with the lender.
A personal loan agreement may contain a provision that requires the borrower’s salary and end-of-service benefits to be deposited into an account held by the lender from whom the loan was obtained. This is in line with Article 2(1) of the Central Bank of UAE’s approved Personal Loan Agreement Formats.
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“Article 2 – Securities and Documentation.
The borrower must agree to certain conditions to secure the repayment of the loan and any related charges:
1. Supply the bank with a formal letter from their employer confirming that the monthly salary and end-of-service benefits will be transferred to the bank during the loan term.”
Moreover, a lender may have the right to request the repayment of the remaining balance on the loan if they believe that specific situations (such as job termination) may hinder the borrower’s ability to repay. Article 4(6) of the Personal Loan Agreement Formats approved by the Central Bank states: “The loan becomes due, including all installments, interest, and any associated fees and expenses, without the need for notice or court action, if any of the following occurs:
6. If the bank identifies factors that may impede the borrower and/or any guarantors, as allowed by current regulations, from meeting their obligations to the bank.”
According to the guidelines from the UAE Central Bank regarding personal loans, if you lose your job, the lender may restrict access to your account once your end-of-service benefits are deposited into the account linked with the lender for whom you have an outstanding personal loan.
Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He holds legal qualifications in Dubai, the UK, and India. For more information about his firm, visit www.amalawyers.com. Readers can send their inquiries to: [email protected] or forward them to Legal View, Khaleej Times, PO Box 11243, Dubai.