UAE banks have identified cases of deducting part of the end-of-service rewards from employees who borrowed money and did not repay it.
Is it possible for banks in the UAE to deduct loan amounts from end-of-service tipping?
I have a loan that is still outstanding in the United Arab Emirates. I was wondering if the bank has the authority to take the money from the end-of-service gratuity that I received.
It is presumed that you are anticipating the termination of your position, and it is also presumed that you have obtained a personal loan from a financial institution. As a result, the requirements of Notice No. 3692/2012 issued by the Central Bank of the United Arab Emirates, which pertain to General Terms and Conditions and Loan Agreements texts that were developed and approved by Emirates Bank Association, are relevant.
Conditions for deducting end-of-service benefits in the UAE
A condition that states that the borrower's salary and end-of-service benefits are to be credited to the lender's bank account may be included in a personal loan agreement between a lender and a borrower. This clause may be included depending on the circumstances of the loan. Article 2(1) of the Securities and Documentation of the Personal Loan Agreements Formats Approved by the Central Bank of the United Arab Emirates states that this is in compliance with the aforementioned.
Article 2, which deals with documentation and securities.
The following is a commitment and undertaking made by the Borrower as a guarantee and security to pay the loan interests, commissions, fees, and any other amounts that fall due in accordance with this agreement:
1. You are required to provide the bank with a letter from the borrower's employer, in which the employer promises to transfer the borrower's monthly income as well as the end-of-service perks to the bank for the duration of the loan.
In addition, a lender has the right to demand that a borrower pay the outstanding balance of a personal loan if the lender believes that the borrower may not be able to repay the loan in the event that the borrower loses their job. This is in accordance with Article 4(6) Personal Loan Agreements Formats Approved by Central Bank of UAE, which states, “The loan elapses and all the instalments, interests and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the Bank according to this agreement or in accordance with the law in the event of occurrence of any of the listed below events:
6. If the bank becomes aware of circumstances that give rise to the possibility that the borrower and/or any of his guarantors may be unable to fulfil their commitments to the bank, as permitted by the regulations that are now in place at the Central Bank, the bank may take the following action.
In accordance with the instructions that were previously specified by the United Arab Emirates Central Bank about personal loan agreements, in the event that your employment is terminated, the lender has the ability to recover the amount of the loan that is still outstanding from the final settlement amount that the borrower is required to receive from their employer in their bank account.
On the other hand, the lender might not choose to do so if the borrower has found new employment and can demonstrate to the lender that they will continue to pay the lender and will continue to receive compensation from their new company.
