Understanding Borrower Rights and Obligations Under UAE Law
A jobless expatriate in the UAE is seeking legal recourse after struggling to repay a bank loan following the loss of employment. The individual, who had been repaying the loan for five years, claims to have paid 90% of the loan value, but the bank insists that only 50% has been repaid. With no source of income, the borrower is now facing the possibility of a civil lawsuit from the bank. This situation raises important questions about the rights and obligations of borrowers under UAE law.
Borrower Obligations Under UAE Law
Repayment Obligations
According to Article 721 of the UAE Civil Transactions Code, a borrower is legally obligated to repay a loan upon its maturity date, regardless of whether they benefited from the loan or not. The law states:
“The borrower is bound, upon expiry of the loan period, to restitute a thing equal in amount, kind, and quality, at the agreed time and place, regardless of whatever change may occur to its value.”
This means that even if the borrower faces financial difficulties, such as job loss, they are still required to fulfill their repayment obligations.
What Happens If a Borrower Cannot Repay?
1. Civil Lawsuits by Banks
If a borrower defaults on loan repayments, the bank has the right to file a civil lawsuit to recover the outstanding amount. In such cases, the court may rule in favor of the bank, requiring the borrower to repay the loan.
2. Requesting Installment Payments
Borrowers facing financial hardship can apply to the judge of execution to request repayment in installments. The judge will consider factors such as the borrower’s financial circumstances, income, and ability to pay before making a decision.
Disputes Over Repayment Amounts
The Role of Banking Experts
In cases where there is a dispute over the amount repaid, the borrower can request the court to appoint a banking expert. The expert will review all payment records and recalculate the amounts paid by the borrower.
Burden of Proof
Under Article 1 of Federal Decree-Law No. 35 of 2022 (the Law of Evidence in Civil and Commercial Transactions), the burden of proof lies with the borrower to demonstrate that they have repaid the claimed amount. The law states:
“The plaintiff has the right to prove his claim, and the defendant has the right to disprove it.”
This means the borrower must provide evidence, such as bank statements or payment receipts, to support their claim of having repaid 90% of the loan.
Steps for Borrowers Facing Financial Hardship
1. Communicate with the Bank
Borrowers should proactively inform the bank about their financial situation and explore options such as restructuring the loan or temporarily pausing repayments.
2. Seek Legal Advice
Consulting a legal expert specializing in banking and finance can help borrowers understand their rights and explore potential solutions.
3. Apply for Installment Payments
If the bank files a lawsuit, borrowers can request the court to allow repayment in installments based on their financial capacity.
4. Gather Evidence
Borrowers should maintain detailed records of all loan repayments, including bank statements and receipts, to dispute any inaccuracies in the bank’s claims.
Key Takeaways for Borrowers
- Repayment is Mandatory: Borrowers are legally obligated to repay loans, even in cases of financial hardship.
- Installment Plans: Courts may allow repayment in installments for borrowers facing genuine financial difficulties.
- Dispute Resolution: Banking experts can help resolve disputes over repayment amounts, but borrowers must provide evidence to support their claims.
- Proactive Communication: Engaging with the bank early can help prevent legal action and lead to mutually agreeable solutions.
Conclusion
The case of the jobless expat highlights the challenges borrowers face when repaying loans during financial hardship. While UAE law mandates loan repayment, it also provides mechanisms such as installment plans and expert mediation to ensure fairness. Borrowers should stay informed about their rights, maintain accurate records, and seek legal advice when necessary to navigate such situations effectively.
By understanding their obligations and exploring available options, borrowers can protect their interests and work toward resolving financial disputes amicably.
