Collection of the debts can be a challenging task for an individual or a business. If an individual or business fails to recover the outstanding debt, it can culminate into financial difficulties. In the UAE, a comprehensive set of debt collection laws has been established with the primary objective of safeguarding the rights and interests of both creditors and debtors.
In recent years, the UAE government has taken several steps to strengthen its existing legal framework regarding insolvency proceedings and debt collection. It is essential for both the creditors and debtors to become familiar with the recent guidelines as well as debt collection practices to avoid any legal complications.
New Debt Collection Laws 2023
In the United Arab Emirates, there are several laws and regulations that govern debt collection practices. The rights of both the debtors and creditors are protected under these laws. The Federal Law No. 18 of 1993 (regarding commercial transactions) is the primary law governing debt collection in the UAE. It is this law that sets out the necessary rules and regulations regarding debt collection for commercial transactions in the UAE. Apart from the commercial transaction law, some other laws and regulations are also applicable to debt collection in the UAE:
- Civil Transactions Law – It covers legal aspects of non-commercial debt collection. This law provides a legal framework for debt collection activities between individuals.
- The UAE Central Bank’s Debt Collection Regulations – By using these regulations, the banks and financial institutions collect customer debts.
- Federal Law No. 4 of 2020 – This law is applicable to the collection of debts that are related to intellectual property rights.
What are the Common Debt Collection Practices & Guidelines in the UAE?
While collecting the debts, the debt collectors are supposed to follow certain guidelines:
- Intimating or harassing the debtor is not permitted. The debtors should be contacted only during suitable time.
- The creditor must not disclose financial information or the debtor’s personal information to the third party. Only after taking the consent of the debtor, any such information can be disclosed.
- Sharing very clear and precise information about the debt with the debtor.
- The debtor must be provided with a sufficient number of opportunities. This also helps to avoid disputes.
The aforementioned guidelines aim to protect the rights of debtors. As per the law, only ethical debt collection techniques should be utilized. However, legal action is the last resort after all other alternatives fail.
New Laws For Debt In The UAE
The United Arab Emirates Cabinet announced Federal Decree-Law No. (19) of 2019 on Insolvency and it aims to govern instances that involve individuals who are dealing with financial difficulties. Earlier, the bankruptcy legislation applied only to businesses and entities. However, the newer law is amended to handle financial issues that belong to individuals.
The new UAE debt collection laws are designed to provide the borrowers with some breathing space. Now, it is possible for the debtors to escape criminal prosecution for fiscal issues such as matters pertaining to bounced cheques. As per the latest laws, the debtors can use the bankruptcy legislation to settle their obligations without the fear of facing any legal repercussions. Here are the key changes made to strengthen the legal framework of debt collection:
The Bankruptcy Law
The Federal Law No. 9 of 2016 is a bankruptcy law that aims to protect the rights of both debtors and creditors during the bankruptcy proceedings. This law allows the sale of assets, restructuring of the debts, and even the discharge of the debt is permitted but in certain conditions.
The Insolvency Law
Federal Decree-Law No. 9 of 2016 is a insolvency law introduced in the UAE that provides a legal framework for companies to liquidate or restructure their debt. Under this law, the companies can approach and negotiate with the creditor to create a settlement plan. As per this law, the restructuring proceedings are court-supervised.
Creating The Debt Repayment Plan
The UAE Central Bank has come up with a new debt relief program. It facilitates debtors to enter into a repayment plan with their creditors. As per this debt repayment program, the debt can be settled within four years. However, in some exceptional cases, the deadline can be extended.
The Decriminalization of the Bounced Cheque
Cheque bounce was a criminal offense in the UAE, and it could land you in prison. However, as of January 2022, the UAE government has decriminalized bounced cheques.
Know more about UAE Laws on Bounced Cheques
Conclusion
While navigating through the process of debt collection in the UAE, it is crucial to have a comprehensive grasp of the legal structure, procedures, laws and regulations. Many individuals and businesses struggle with the complexity of the legal system. The UAE government has made necessary amendments to make things easy for the debtors and creditors to manage their finances. The debt collection experts at Convention 360 are available to provide you the necessary guidance and update you on the latest amendments.