A debt is a financial responsibility incurred by a person or organisation in exchange for a service, a product, a loan, or any other liability with a monetary value. Unless there is a dispute, it is not a negative thing to have debt. Missing a committed payment, bouncing a check, failing to repay loans and agreed-upon markups on time, and missed medical or other service bills are all instances that will result in the debtor becoming a defaulter. This is when the lender retains the services of a debt collection agent or debt recovery firm to assist them in recouping their losses. This article talks about the debt recovery laws in UAE.

Debt Collection in United Arab Emirates

The UAE's debt collection rules are not particularly complex. UAE debt collection procedures might be difficult for a variety of reasons.  It can be extremely difficult for lenders to recover bad debts as the UAE lacks specialist courts for financial litigation, forcing the debt collection lawyer to litigate in civil courts. Due to the lack of specialised financial litigation tribunals, lenders' claims against the debtor are ultimately decided by the Federal Supreme Court or the Court of Cessation. Both institutions and their subordinate institutions are governed by civil law.

How Are Debts Collected In The United Arab Emirates?

• While UAE law is progressing toward excellence in the implementation of commercial rules, engaging in judicial proceedings is not a popular method of debt collection. This is true not only in the UAE, but throughout the world, where lenders will seek a manner or use an out-of-court procedure to collect their loan. This is frequently more expedient, speedier, and more responsive in terms of debt collection, and costs less than a legal process would.
• UAE debt collection services can assist lenders in collecting debts outside of court. A reputable debt collection service will gather all available information about the debtor. They then contact the debtor on behalf of the lender in a very professional manner to remind them of their unpaid debts. This type of communication is conducted solely via telephone and email. They attempt to educate the debtor on the probable legal consequences of non-payment of bills on time.
• The laws governing individuals with financial troubles are governed by 'Article (8) of the Insolvency Law Dubai.' This includes situations in which people in the UAE seem unable to repay obligations such as credit card bills or loans. This new UAE law is not the same as the UAE bankruptcy law.
• The UAE's current bankruptcy law applies only to UAE-based firms and corporations. Individual debtors, on the other hand, are the focus of insolvency law.
• Individuals who were unable to settle their debts in the UAE were formerly subjected to disciplinary actions such as travel bans and even incarceration. The new federal law for insolvency in the UAE has substituted this with a more forgiving process that helps defaulters in the UAE to handle their unpaid finances more efficiently. Some of the new amendments that will help in debt relief are -

1. Individuals who are already in debt or who expect to be in debt in the near future might get legal help.
2. Place UAE debtors on a three-year repayment plan with the support of specialists to help them pay off their debts.
3. Provide possibilities for debtors to work and be productive in order to protect them from legal action. This will enable them to support their families, particularly in circumstances where the debtor is the family's sole earner.
4. Prevent debtors from taking out new loans unless the court orders them to do so.

• Residents and legal experts alike praised the modifications to the UAE debt law for their good influence on the community. In Dubai, Emiratis and expats that are unable to repay their credit card debts or outstanding debts no longer have to worry about being imprisoned. These individuals can now work to pay off their debts with the help of the UAE government (s).
• A payment order can be issued during the case management phase of regular civil proceedings if the requirements of a payment order are met and the supervising case management judge has the jurisdiction to issue one, according to Article 17(8) of the 2021 Executive Regulations. These reforms may benefit creditors greatly by resolving cases favorably at the case management stage, before large legal expenditures and a lengthy litigation phase are invested.
• Furthermore, the 2021 Executive Regulations now stipulate that judges in regular civil cases can make judgments even if a payment order is not available. As a result, creditors should no longer be concerned about their claims being dismissed in traditional court proceedings due to the possibility of payment orders.

Keeping it Legal and Fair

• It is critical to understand why the lender engages a debt collection firm rather than taking the debtor to court or personally forcing them to repay the obligations. Even though the debtor has failed on their payments, the lender prefers to recover the debt professionally.
• As a result, the debt collection service must likewise conduct itself professionally when locating and addressing the debtor for collection. This is because debt collectors operate as representatives of the lender, and any unjust or illegal act on the part of the debt collectors can also tarnish the lender's reputation.
• Collecting debts is not a simple operation, and debt collection firms must have extensive knowledge in order to recover bad debts on behalf of lenders in a professional manner. There have been numerous instances where debt collection agencies' actions were found to be extremely unjust, and instead of resolving the situation, their actions exacerbated the lender's and debtor's difficulties.
• A seasoned debt collection service in Dubai, would first determine why the loans become bad debts. What reasons contributed to the debtor's inability to pay their debts, was the debtor able to make any previous payments, and what was their payment history? Additionally, they will consider the debtor's present circumstances in order to determine the debt's collection potential.
• The debt collection agent's duty should be that of a facilitator, not just for their client, but also for the debtor. Each debtor is unique; there will be many individuals who are aware of their obligations to the lender and are working diligently to repay their debts. It is their circumstances that are often unfavourable to them, but with a little assistance, they can begin repaying. A professional debt collector will also function as an arbitrator and mediator in the collection process between the lender and the debtor. They attempt to make it easy for the debtor to repay their debts.

When the debtor is truly dubious?

If the debtor appears careless in responding to collection agencies' attempts or makes pledges and then breaks them to purchase more time. This type of debtor is problematic. The debt collection agency will have to serve them with a registered legal demand notice to repay the debts on behalf of the lender. The debtor is obligated to pay the initial debt plus any additional fines within 15 days of receipt. If the debtor fails to do so, a court case will be filed. The court proceeding necessitated the hiring of a debt collection attorney to pursue the case, as court proceedings in the UAE are conducted entirely in writing. The court will rule following a thorough examination of both parties' proceedings.

The 2021 Executive Regulations appear to acknowledge the availability of payment orders for creditors, and they mark a significant step toward expanding their utility while remaining consistent with the regular court system.

By Meghna Sherman

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