Amended UAE law on bank loans requires ‘sufficient’ security from lenders

Banks lending money to individuals or sole proprietors must take “sufficient” security for the loan under the UAE’s amended federal consumer protection law. The law states that "banks must have sufficient securities or guarantees against loans they provide". The amended law, which was implemented in January last year, is aimed at preventing situations in which loans are granted based on the borrower’s reputation or name, without adequate security for undisclosed debts. In Abu Dhabi, the amended law also extends to corporate loans. This change marks a departure from the practice of using personal guarantees as the primary means of securing loans in the UAE. Experts say the law has relieved Abu Dhabi-based defaulters with personal guarantees of their obligations since banks may no longer be able to collect on UAE-based assets for debt recovery following a court verdict. The federal law does not affect execution procedures in Dubai and other emirates. Daniel Hall, Co-Head of EMEA of legal finance provider Burford, said that banks dealing with debtors or personal guarantors in the Middle East who have defaulted on their loan payments may try to target debt recovery via the debtors’ assets globally and build a compelling case for enforcement of court rulings on debt recovery. ICA/Expat Media
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