Defaulting on personal debt is a criminal offence in the UAE, a fact most recently evidenced in the pardon of almost 7,000 Emiratis by the president, Sheikh Khalifa. Their debts, amounting to a hefty Dh2 billion, will now be paid by the government.
This was undoubtedly an act of generosity by the UAE's leader. But it was also a potent reminder of just how outdated this country's debt laws are.
The current practice of obtaining loans or credit cards by posting a cheque as collateral with the issuing bank is highly inefficient because it doesn't take into account the consumer's creditworthiness in determining how much debt he or she can handle. If the consumer defaults, the bank can use the cheque to transform the case into a criminal matter.
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