Using cheques for financial transactions is one of the most widely used methods to cash-out, deposit money in a bank or even pay rent in Dubai. In doing so, it is common practice that the account holder ensures he has sufficient funds when issuing the cheque in order to avoid dishonoring or ‘bouncing’ the cheque.
In the UAE several factors can cause a cheque to be returned like technical errors, closure of the issuing bank before the cheque is redeemed or if instructions have been given to the bank to withhold the payment. However, the most common reason for bounced cheques is highly due to insufficient funds.
In light of this, to ensure efficient use of police resources, bounced cheques in most cases were no longer a criminal offense as per the Federal Decree Law no. (14) of 2020 but rather, a civil suit in which strict financial penalties were enforced. The new law de-criminalizes bounced cheques except in specific cases where:
- If the drawer asks the bank not to cash it before a certain date,
- The drawer shuts the account,
- Cheque is signed inaccurately or,
- If drawer intentionally signs the cheque wrongly.
Similarly, a jail sentence is still imposed on an individual if a cheque is forged or counterfeited. This new amendment has come into force since 2nd January 2022 and has played a big role to promote investments and corporate trust between companies and businesses.
The new laws are relevantly easier to execute as the cheque holder has the capacity to obtain partial payment if the full amount is not yet present in the account. As for the remaining amount, an order for full or remaining payment can be made to the courts execution judge making it a faster process to ensure payment without the involvement of the police. The beneficiary can also claim through the civil courts.
Furthermore, cheques that are bounced against any loan re-payment would also bear late payment charges and penalty fees by the bank which can vary from a minimum of dhs 200 up to 10,000 dhs depending on how large the amount is. This penalty is doubled if the offence is repeated. Bounced cheques leave a negative mark on your bank record making you a risk for future loans, credit approvals credit score etc. Nevertheless, it is possible to dispute any information that might be improper.
Depending on how big the amount is due from the account holder, penalty is varied depending on the amount owed as per the new amendment.
|LESS THAN AED 50,000||AED 2,000|
|AED 50,000 – AED 100,000||AED 5,000|
|AED 100,000 – AED 200,000||AED 10,000|
Moreover, in the event that such an unfortunate circumstance does arise, it is vital that the balance be paid off before the case is taken to court. Nonetheless, if the required funds are unavailable or one is unable to pay the amount, it is ideal to prepare a proof of your incapacity to pay which will allow you to verify that you did not deliver a bad cheque with ill intentions. On the other hand, the party that was denied the promised funds can still file a civil case against you. It is also critical that one seeks professional legal help at this stage to be aware of all the legal options available.
Failure to present the necessary evidence could result in being ordered to settle the amount within 15 days’ time by the court or the repercussion of getting your bank account blocked along with any other immovable or movable property inside the UAE. Hence, as soon as one realizes that he is unable to pay the amount, it is best to work out a settlement with the other party and come to terms with a reasonable installment plan. Another way is to use the new insolvency law in the UAE which with the help of legal arbitration will help work off the debt. It must be noted that bank has the capacity to pay the available partial amount present in the account to the drawee unless rejected. The drawee can also directly open a civil execution file against the drawer.
Learning of this new law begs the question ‘what will happen to the cases filed prior to jan 2nd 2022?’. It is possible that having a criminal case might ban you from travelling, however, in response to the new law, the concerned individual will have to formally remove and dismiss the case registered against his name from the police station and/or the public prosecution office from any further investigation and criminal complaints. This will release any travel bans or warrants issued subject to the old criminal law. Seeking legal guidance in such matters is recommended to expedite the process.
How do you stay in the safe zone? Dubai is a country with an expensive lifestyle – Budgeting and financial planning can take you a long way in terms of your financial standing. It is recommended to keep more than the minimum balance in your account to keep your credit score healthy even after a cheque is encashed. You can also set a future date on the cheque for when you are certain funds will be available in the account. Online payments are also another convenient option to avoid any such fines and can also be automated.
These new changes have strengthened the rights of both parties, and also aligning and re-enforcing internationally recognized practices.
Written by: Ibrahim Saeed