The Central Bank of the United Arab Emirates is currently in the process of reviewing the debt default rates for Emirati borrowers following a presidential pardon intended to help borrowers avoid jail time for check fraud.
Since the presidential decree in October, lenders have seen an increased number of Emirati borrowers who have fallen behind on loan repayments, according to The National.
“It’s an ongoing review,” Sultan Al Suwaidi, the governor of the central bank, said, The National reports. “We have a special division for consumer protection, and they will start issuing statistics.”
Data released by the central bank revealed that more than one million checks failed to clear last year, totaling $8.22 billion. The data, however, did not reveal the number of checks that failed to clear because of technical issues, including rips and tears, or the number of checks that bounced due to insufficient funds.
In the UAE, writing a bad check is considered a criminal offense, but since the presidential pardon, more than 1,000 Emirati borrowers in default have been released from prison, according to The National.
The decree came as politicians, economists and bankers agreed in recent months that the current laws criminalizing the writing of bad checks were outdated and in need of reform. While the central bank said that it may be in favor of eliminating penalties if the debt could be recovered quickly, it said that the ultimate decision lies with stakeholders.
Some lenders have advocated for the establishment of a federal credit bureau to enforce financial laws rather than impose jail time on citizens who write bad checks. The Emirates Banks Association announced earlier this month that it would provide the central bank with recommendations to replace criminal penalties on bounced checks, The National reports.