Tuesday, 07 December 2021 06:24 GMT

UAE- It's illegal to seek interest on loans given on a personal basis


(MENAFN- Khaleej Times) A few years ago I loaned a then friend a total of over Dh350,000 to bail her out of jail for bounced cheques, credit card and bank loan issues as well as pay her rent and school fees for her son. She was about to inherit a house from her recently deceased mother, so I didn't think it would be a problem getting my money back after a few months.

As she had been working for me for a few months I could deduct a portion of her salary towards paying back the personal loan until she received the money from the sale of the house, and this happened for one month. I then found out she was stealing from me, had stolen a cheque from my company and forged my signature, which the bank cashed. She also had alcohol issues affecting her ability to work, so I had to terminate her but did not bring a police case against her due to eight years of friendship and she was looking after her young son.

Before terminating her I made her sign a document stating what she owed me and that she would start re-payments once she had a new job which she got a few weeks later.

Since then, she has only paid Dh1,000 back to me, has changed phone numbers a few times, blocked me on social media and moved out of the villa where I knew she lived. I have managed to get hold of her new phone number and where she works and I have contacted her many times. Although she has promised to start repaying the loan, to this day only one payment has been made.

To make things worse I had taken a bank loan to bail her out of jail and pay off her debts which I am still paying almost five years later and can barely afford due to changes in my circumstances.

Is there any legal way I can recover the loaned money back as I only a signed letter stating what she owes me and WhatsApp messages confirming she will repay the loan. The bank account where she forged the cheque was closed a few years ago and they would not give me the fraudulent cheque copy

I don't have the money to open a legal case against her as I understand its Dh40,000 plus legal fees and I don't think it a strong case because the police don't consider this a crime as it was a personal loan.

Answer: Pursuant to your queries, we assume that the confirmation letter of loan collected by you from your friend does not state anything related to interest. It is illegal in the UAE to give a loan on interest by an individual to another individual or a corporate. This is in accordance with Article 409 of the Federal Law No. 3 of 1987 related to Penal Code of the UAE (the 'Criminal Law'). It states: "Punishment by detention for at least three months and a fine of at least Dh2,000 shall be inflicted upon any person who deals with another person by usury interest in any kind of civil or commercial transaction, including any express or latent condition that involves usury interest".

Latent interest shall include any commission or benefit stipulated by a creditor if such a commission or benefit has no corresponding real legal benefit or service provided by the creditor as a consideration. A principal debt and implied interest may be proved by all means available."

You may consult a legal counsel who could review the letter signed by your friend to determine if the text of this letter has any reference that she is holding this money from you in trust. If yes, then this legal counsel shall advise whether you could file a criminal complaint about breach of trust.

Know the law:

Punishment by detention for at least three months and a fine of at least Dh2,000 shall be inflicted upon any person who deals with another person by usury interest in any kind of civil or commercial transaction, including any express or latent condition that involves usury interest.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom, Singapore, and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: or send them to Legal View, Khaleej Times, PO Box 11243, Dubai


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