It’s a Catch 22 for loan defaulters
Residency departments will not renew visas if expats face criminal charges
Staff Reporters
Residents defaulting on bank loans may face criminal charges, which will jeopardise their residence visa status and mark them as illegals.
Residency departments are not renewing visas of expatriates and their dependents if they are wanted by police for criminal offences. In the case of loan defaulters, it blocks all possibilities of remaining employed and closes any chance of repaying the debt.
Bankers insist that a criminal case is initiated when a borrower is categorised as a willful defaulter. That happens only after a series of communications between the customer and the bank. Defaulters are given ample chances to pay back their dues, bankers said, as it is not in their interest to cause their client to lose his/ her job and residency status.
“When an individual takes a bank loan or has outstanding credit card payments and for a reason or another fails to pay the minimum amount, the bank has the right to take legal action against that person,” a lawyer told Gulf News.
However, many debtors complain they have stopped repaying because of “rigid bank loan and credit card rules.” Defaulters can end up in jail over bounced cheques, lose their jobs, have their work visas blocked, and taken to criminal and civil court.
A 34-year-old Indian committed suicide on Monday. The sales executive was said to be under heavy debt. Police are investigating the incident. Another resident owed banks Dh700,000. While he has paid the principal amount, interest charges have made his loans overwhelming. His residence visa is due for renewal and his fate is now threatened.
A security cheque is taken by the bank as a guarantee for the loans and credit card limit.
The amount on the security cheque is equivalent to loan amount plus 20 per cent of the principal
In the case of credit cards the amount on the security cheque the card limit plus 20 per cent.
When a default is recorded, first the customer is contacted and the legal implications are explained.
When unable to contact the customer, references given in the loan application document are contacted.
In most cases banks wait up to three successive non-payment of installments or credit card minimum payment outstanding before security cheque is presented to encash the outstanding.
When the security cheque bounces, the bank files a criminal case against the customer with the police.
After filing the criminal case, police departments intimate residency departments which will stop renewing residency visa of the defaulter, dependents and employees.