This was one of the comments on the Zawya website – commenting on the flight of Mr. Ford / BlueBannana – and Post Dated Cheques.
By the way, I am told that when you get a credit card issued by the bank in the UAE, they ask the card holder to make out a blank Post Dated Cheque – which the Bank holds as security. You guessed it – if they think the revolving amount will become a bad debt, the bank presents the cheque. If it bounces, that turns it into a criminal incident.
Same for a car loan etc…. the bank holds a blank Post Dated Cheque as ultimate security.
Partial reposting -
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Post Dated Cheques / PDC by John smith – 13 hours ago
The Post Dated Cheque Laws are in the UAE are antiquated, and each passing day that these laws are not addressed, means the cancer keeps spreading through the system. This goes beyond businessmen. Getting caught up in the mess in the UAE can be very Kafkaesque.
Here’s my experience:
1) Once you issue a Post Dated cheque – there is no system for the account holder / issuer to put a stop on the cheque. Closing the account is illegal, even if it is because you are being defrauded. Draining the funds out of the accounts, to let the cheque bounce is illegal. The only way to get the bank to put a stop is to get a court/police order. That court case can cost Tens of Thousands of Dirhams.
The bank permits cheque stops in the event – get this – cheques that have not been issued.. if one has lost their cheque book. Big deal.
2) Very common practise for developers to advertise projects with payments seemingly linked to construction milestones which should occur by certain dates. The Developer then pushes people to write post dated cheques, which they cash with regularity while construction does not start or is on terminal hold. In this scenario, there is no truth in advertising laws, so the developer hasn’t violated anything. If you let the cheques bounce, you are guilty.
3) Developers who have abandoned projects, or are near certain to abscond – are cashing cheques. Even in this scenario, it is the developer that has the upper hand. If the buyer lets the cheque bounce, he commits the first illegality.
4) Developers present cheques to non-escrow accounts. While that is illegal – if you let the cheque bounce, the developer – by walking into the local police station – can get you put on an immigration watch list. You think the police, who detain you at the airport, understand anything about escrow accounts…?
… fortunately, they’re now swamped by the sheer volumes. Over 500K in the 1st 4 months of 2009 or 6% of the total issued.
A few things that can be done – just as an observer
5) Bouncing a cheque is a criminal act in the UAE. The law should be changed to make it a civil / commercial act, or at least introduce a threshold or cutoff amount. Or even start by segregating between business & personal accounts.
6) Since the laws don’t get published openly, people keep writing cheques not knowing the consequences or limitations. Banks should give every cheque book owner a one pager on the consequences of cheque bounces in the UAE. Lots of people from the West automatically think that a cheque can be stopped, like in their home countries.
Welcome any banker or lawyer to correct my understanding… or even present the alternate side – the positives of the current system. I can’t think of anyone but a small minority that benefits from the status quo.
I am stuck with a developer there – who advertised 50% payment until completion, 25% on handover, and 25% in installments after handover. Construction start was delayed for 12+ months, while, the developer helped himself to 40%, in some cases 60% of total payments by mid 2009. Having approached a law firm for help, their advise was to give us a lecture on the PDC system in the UAE, and the dire consequences of letting the cheques bounce………
