Understanding Check Bounce in UAE

Amendments to UAE legislation in relation to bounced cheques are set to be enforced in 2022. The modifications involve bounced cheques, as well as the issuance of a cheque that does not have any value. The UAE Cabinet approved the landmark decree that amends provisions to existing commercial transactions legislation, allowing drawers and payees for bounced cheques with additional opportunities at reconciling them. 

The Prime Minister and Vice President of UAE and Ruler of Dubai was the chairperson during the Cabinet meeting which redefined victimless crimes involving the issuance of cheques. The long-awaited reform to the UAE commercial transaction law will boost business confidence in the country. 

Civil mechanisms for recovering required payments

The amendments seek to provide advanced, quick, and civil mechanisms in recovering required payments. As per the new decree, a recourse for civil mechanisms will avoid criminal lawsuits, as well as facilitate more lenient alternative procedures. Payees are encouraged in reconciling debts and stipulate payment for the value of a bounced cheque as the primary condition for the abatement of a lawsuit. 

Bounced cheques will no longer be considered criminal offenses starting from 2022. Still, such an assumption will have to be further clarified. The latest amendments are going to ensure multiple options and mechanisms for payment collection. One of the methods will include obliging banks to pay a partial amount following making a deduction from a check issuer’s account. 

Although the existing regulations entitle banks in effecting partial payment for a cheque basing on an account’s available amount, the majority of banks don’t implement it. Amendments made recently will help both the beneficiary of the cheque’s issuer.  

Civil court proceedings

Apart from a fine for the issuance of a bounced cheque, the cheque issuer may also have to deal with a civil lawsuit. Those with bounced cheques that are worth AED 200,000 or more can have a case referred to the Civil Court. Any bounced cheque below AED 200,000 will only entail payment of a fine of AED 10,000 at the maximum.  

A victim of a bounced cheque is allowed in exercising his rights with the opening of a civil lawsuit against an issuer of a cheque for the value of the cheque plus reasonable compensation. A bounced cheque case, contrary to popular belief, won’t just end with a fine to be settled by the cheque issuer. If the UAE Civil Court will rule in the plaintiff’s favor, then a twelve percent interest rate is also going to be added to the cheque’s value. The accused will be obliged in paying the amount. In addition, the court can order the accused in paying legal charges. The complainant also is entitled in requesting the court in issuing a travel ban for the person writing the bounced cheque. The plaintiff may also request for the freezing of the accused’s assets as a precautionary measure while no final judgment has been issued.

Bounced cheque fines are as follows: 

• Cheques worth AED 1 to AED 50,000 – fine of AED 2,000
• Cheques worth AED 50,000 to AED 100,000 – fine of 5,000
• Cheques worth 1000, to AED 200,000 – fine of AED 10,000

Bounced checks may be simple errors; however, financial institutions and the local government take it very seriously. If you want to discuss with seasoned bounced cheque lawyers in UAE regarding your situation, call us here in HHS Lawyers today!

What causes cheques to bounce?

A cheque will bounce under the following circumstances: 

• The bank account of the drawer was closed prior to the cheque being presented for payment
• Changing the signature on the cheque or omitting it from being paid
• Funds are insufficient in the drawer account

How can I avoid a bounced cheque?

• Balance a checking account, so you know the amount you have for spending. If you still do not have the money in your account, then don’t write a check. Make sure your account for online bill payments and other automatic deductions.
• Always review account balances prior to spending. Check your accounts online. You can also visit an ATM to inquire about your balance. It is worth taking time in stopping bounced checks.
• Utilize a budget to know where each cent goes prior to even getting the money. Planning ahead will mean covering necessities, at the same time being realistic with expectations on additional spending.
• Do not make electronic payments if they are causing bounced cheques. A good way in understanding and controlling your spending would be to do it manually. As soon as you stop a bounced cheque, you can then go ahead and continue using technology.
• Take pictures or photocopies. This is to ensure that you are not vulnerable to false claims. Whenever you’re signing a check, keep copies, regardless of whether it is for a real estate agent, business partner, or any other purpose.