Add to Technorati Favorites expat Abu Dhabi Dispatches: Damn Banks II

Monday, October 31, 2011

Damn Banks II

I received a comment on my last post from Anonymous who seems to be an insider at one time. It was very informative and brought up some good points that I had to answer. The comment was long and my responses were at least just as long so I decided to make a new post. Maybe we all can learn something and clear up some misunderstandings, if any.

Anonymous is in yellow text, mine in white.

Anonymous said...

    LOL! SOME of what you said is true, some are "spiced" if you will.

    BTW, that building that you said came from somewhere... It isnt OWNED by NBAD. That building is owned by a member of a royal family. 3 floors are rented by NBAD.

You maybe have me there! I looked for a stock photo of a big building with the NBAD logo on it for the first photo. Its kind of a blogging thing. Here is the real HQ, the NBAD tower.

NBAD Tower

    There is no link with immigration, or with the traffic dept. If you want I will tell you the exact process (I had sadly asked that many ppl be bared from flying myself)

When a person properly quits their job, they have to surrender their passport to their employer/sponsor and will only get it back (on the day of travel) after all paperwork, including clearance letters from the banks et al, are submitted. If an expat cannot provide these, they do not get their passport back until all debts are paid. They can't leave as they have they have no passport, job or home at this point. I have heard jail is a desperate option.

What this does is creates the runner/absconder phenominon. Things go bad here with some folks for various reasons and they are deep enough in debt they cannot come up with the cash to settle local debts. So instead of having the option of leaving and paying the debt from abroad, they get desperate and just escape. I see enough dusty cars with flat tires in airport parking lots to know this is quite common. I think most people want to pay their debts but these rules force some into a corner. Seems the banks stand to lose more the way things are than trying to work with their customers before it becomes a legal problem.

Curiously, as I said in a previous post the banks seem uninterested in retrieving these automotive orphans to mitigate losses.

Banks Seem Unconcerned About Recovering These Assets, They Are Everywhere

    Also, there are reasons why banks here cant allow people to pay for debt from abroad. Mainly because you cant enforce it in any way. If a bank scares you into thinking that it can "get" you when ur back home, they are usually mistaken. Few are the countries in which a bank here can get a bad debt holder to pay. Truth.

I think that is changing. I recently got a small personal loan and was asked for family addresses back in the US and my Social Security Number so I could be easily located.Debt collector firms wordwide purchase bad debts from banks all the time and take on the risk of recovering the debt. VISA and Mastercard are also global companies with aggressive collection methods and could damage my credit rating back in the US.

    There are however non official ways to continue to pay for asset backed loans (Like a car or house) but we wont get into those. I will say that I had set a few such schemes up for customers and they did not cause me any issues till the day I left. But not all customers are like that. With 20% of the country being labor, and another 30% being low level employees (with low incomes) you simply cant take chances with everyone. It it really is a chance.

    The banking system here is based on caution. In the UAE it's the exact opposite. Yes, a healthy way to be would to have a nice balance, but you have to understand the contact, this region is not a stable one. the UAE may be stable, but it's surrounded by shit and bad stuff.

    Also, with 90% of the country's population foreigners, the control you have over securing your loan is close to nil. Truth is if you take out 500K worth of loans and leave within a week, the bank will have no warning and little recourse.

I think any of the banks here would go after someone owing that amount of money. They would be crazy not to.

    As for banks not being all they can be to consumers, it depends both on the bank and the consumer.

    If you have a salary of 55K, a 1.6 million mortgage, a car loan, a personal loan, and credit cards, the banks are the best you'll ever deal with.

    If you make 55K and send 45 back home on the same day, most banks wont care about you.

I truly understand about the demographics here and the difficulties they bring.

    Also, not all banks here have the same focus. NBAD has, and is, and probably always will be a corporate bank. Its main job (originally, and still) is to be the banker of the Govt of the Emirate of Abu Dhabi as well as govt owned companies, semi govt companies, and large corporations.

    Do they have consumer banking solutions? yes. Are they good? Maybe. Are they the best? No.

    For a consumer, a more consumer focused bank like RAK bank might be a better option. RAK Bank is one of the few UAE banks that does NOT have a corporate banking section. Only consumer (you) and SME (Your small business)

    As for consumer rates (You mention a credit card at 35%) yes, it is highway robbery. But things are getting better. A few months back the central bank limited what a bank can offer and charge in terms of base banking and lending. CC were not included. Maybe in the revision next year. (Last year a certificate of liability costed 400, today its no more than 100 by law)

I have VISA and MC CC's with US banks that charge 10-12%. I agree 35% is very excessive for the same here. I took that aformentioned small personal loan (unsecured) for a very reasonable single digit rate. The credit cards are a cash cow and are aggressively marketed by commissioned salespeople. The rules seem lax and a lot of naive newcomers succomb the the lure of easy and high credit limits.

    The lack of a central lending database = ppl can get into debt easily and with multiple banks without the banks knowing. But this isnt the banks fault. The lack of the data base is the system's fault, but no one forces all these morons to sign those loan agreements.

 You are right on this. Theoretically, a person can get multiple credit accounts from several institutions without being qualified for the aggregate of the limits. This would not happen in countries with an independent credit bureau because that person could be tracke and info shared between financial institutions. In the US, every citizen has a credit score which sets limits on the amount that can be borrowed.

    It simply isnt anyone else's fault if you cant manage your finances.

I agree with you on that, but it seems a lot of people get into trouble in the UAE and that trouble can cause very serious legal consequences. In my opinion, the banks are like drug pushers making easy credit available to most. Hell, I bought a 99,000AED car on 100% credit after just 90 days on the job. Was that dumb...yes! Would I do it! That car is sold now and I currently free of debt, at least in the UAE. I know many that are way over their heads in credit balances and will have to be in the UAE many more years than they want.

But ultimately it was my decision as I rose to the bait and took the hook.The banks are enablers but it is ultimately the individual that is responsible to refuse the offer.

    But yeah, you added alot of "baharat" (Spices) to the story Ace.

I didn't intend on singling out NBAD. They have treated me quite well except for the online banking troubles. My post tended to drift toward the overall financial system in the UAE as seen by a retail customer.

You are/were obviously a bank employee. I appreciate the insight and if there is something I failed to understand, let me know and maybe I won't sprinkle as much "baharat" on my future posts about the rules here.

I just received an email today, 19 November, from the bank addressing my initial question I asked on 29 October, see below.

Email from Ace to the National Bank of Abu Dhabi, 29 October:

I am now blocked from my online account. I need this fixed as I have bills to pay. Your phone message says 24/7 service for the online accounts and I was informed I could not be helped after 11:00 PM as the technical service was closed.

Ever since the website has changed, there have been problems.


The "prompt" reply 3 weeks later, 19 November:

Dear Ace,
Thank you for your recent email.

You are kindly requested to reply the following to help us process this faster:
1. NBAD Account number:
2. PO Box number:       
3. Branch you received the password from:
4. Mobile/Telephone number:
5. NbadOnline User ID: 
6. time to be contacted :        
For any further assistance, please do not hesitate to contact us again on toll free 800 XXXX  from outside UAE) between 8:00 AM to 12:00 AM on all UAE working days (from Saturday to Thursday) or send us a reply email.
Thank you for using nbadOnline.
Back Office Person
Internet Banking Unit
National Bank of Abu Dhabi

I had better luck with the telephone help-line and the problem was solved 2 1/2 weeks ago through them.  Apparently the email guys are not only unaware that the problem was fixed a long time ago by a 1 1/2 hour call to the help-line, they are just getting around to looking at the problem 3 weeks after my initial email complaint. Unbelievable!!!!

I expect things to work once they are set up. Here  internet , banking , electricity and cable TV services are very fragile and I have experienced many unexpected shutdowns. I cringe when I have to enter the labyrinth of what is called "customer service" in Abu Dhabi. It has always meant a time consuming and frustrating experience trying to correct a situation that was not of my making.  


Anonymous said...

Great insight...thanks guys.

Dave said...

Very interesting, but I'm not sure Ace if the UAE Banks could really damage your credit rating back in the USA?

Ace said...

I could be wrong but when I did a small personal loan lately they asked me for my family addresses and my Social Security Number back home. Those were of no concern when I took out a car loan almost 4 years ago.

In the US, #SSN's are all one needs to access credit bureaus. Seems someone has become wise.

In Re: credit cards, VISA and MasterCard have tentacles world wide and will act upon their client banks' behalf if one gets their nose skinned. There is probably a "secret limit" though

Anonymous said...

SSN's and National insurance numbers for brits are now "mandatory" since 2010.

I say "mandatory" because if you dont provide them, most banks will still book your loan if your a "strong" case.

And for those few that wont, there are 60 or so banks here, you can always find one that will.

Also, the numbers and addresses you list for your family back home are hardly ever checked. Infact, in many cases the bank staff will simply copy your home address off of your passport (if it's there)

I'd like to answer your answers to my answers, but I'm too tired.

Bottom line is that a bank here can do almost nothing to you if you leave before your boss notifies them that you're gone, or before your salary stops being credited.

They know this.

Ace said...

VISA is the one out of the money in case of a credit card default, not the issuing bank. They are global and may come after you.

Unsecured local bank personal loans are different case.

Anyway, it seems the UAE rules encourage "runners" and ultimately end up hurting the banks. Beware of unintended consequences.

Events In Dubai said...

I recently came across your blog and found it quite informative for myself. Although i am not a good surfer, i am sure looking forward towards being a regular visitor of your blog. Keep up the good work.

Ace said...

Thanks Events in Dubai. It is always good to get to get kudos even though I consider my blog a labor of love.

I appreciate your comment!

Stay tuned, I have some big news coming up soon!

Anonymous said...

VISA is the one out of the money in case of a credit card default, not the issuing bank. They are global and may come after you.

Not true. A substandard credit card account in the UAE is transfered to a non interest bearing current account and is turned to a loss directly against the bank after 2 years. Most UAE bank's cannot by way of their agreements with VISA/MC transfer liabilities to them.

VISA/MC only act as the world wide middleman. The loss is 100% the issuing bank's.

Ace said...

So you are confirming that one can run up a huge balance on a UAE bank issued VISA credit card, do a runner and get away with it?

Maybe that is why the UAE banks charge ~35% interest APR on credit card balances, to cover potential losses. That rate is usually reserved for persons of terrible credit rankings in most other countries and is a big reason I refused to get a local credit card.
~9% is what I get in the US.

Overall, I do not find UAE banking rules friendly to clients, especially when an individual needs a clearance letter from the bank to emigrate. That's just effed-up! Why should the government be involved with private banking relationships?

Anonymous said...

Yes. It can and does happen.

And yes, you hit the nail on the head. banks compensate a "riskier" client with a higher interest rate.

Thus our famous 28-36% APRs.

My old US cards were around 14% and I was always told that was "too high!' Oh if you all ever saw what we pay back home!

You dont NEED a clearance letter to leave. No one in the airport will ask you for it. Thats Saudi Arabia.

Your employer will ask for one to pay your final dues, and even then, only if they have previously issued a letter to a bank on your behalf (Remember the salary cert years ago?)

Theoretically, if you never asked for a salary cert to a bank, i.e., one was never issued by your employer, your employer will not ask for a clearance cert.

Those cases where people are infact stopped at the airport are cases where their banks have figured out that they are going to pull a runner and filed with the ministry of interior (Police, who also control the airports)

If you quit today and left tomorrow, the bank wouldnt have the time to figure it out. By the time they did you'd be long gone.

Romana said...
This comment has been removed by the author.
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