Everyone has transactions with banks. Banking disputes always arise regarding personal and corporate accounts which feature overdraft, credit cards, loans, banking facilities, or fraudulent checks withdrawn from the account and other disputes. There are many such disputes with banks and financial institutions in which the bank makes numerous mistakes, including imposing fines on the client that are not included in the signed agreement and in an exaggerated manner. Such mistakes also include adding combined interests by recalculating the interest on the original sum that includes the original interest amount, violating the terms and the conditions of the agreement, refraining from disbursing finance or providing facilities according to the signed agreements and other banking disputes that often lead to litigation since banks do not always pay.
Nour Attorneys & Legal Consultants team works diligently to solve the disputes with banks through amicable means, however, banks usually stall when they are offered an amicable settlement, especially when the rights are owed to the client by the bank and not vice versa. Until now, there are no regulating bodies that are concerned with resolving disputes between banks and clients before resorting to courts such as the Federal Insurance Authority, the Consumer Protection Department, or the Health Authority. Such authorities have the power to impose fines and penalties for non-compliance with their decisions in such disputes, which appear beyond any doubt to contravene commercial or professional practices and do not deserve to be brought before the courts. On the contrary, in cases of banks, the dispute usually is brought before the court for the purpose of litigation.
Furthermore, in cases of disputes with banks, we will mention some of the common issues which usually arise, for example:
References to specific judicial principles, which, sometimes, vary according to the emirate that has jurisdiction over the dispute in question.
1- Calculation of Compound Interests
Banks always calculate compound interest, which is calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. This is regarded as a recalculation of an interest based on another interest and is against law. The bank often relies on the client’s lack of knowledge of accounting practices. You can review one of the case studies on the interest rate reduction through the following article.
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2- The Bank’s Liability for Mistakes and Risks of Profession
The bank is a for-profit entity that provides services to the public, and sometimes, that party makes mistakes. For example, the bank may cash fraudulent cheques from the client’s account, and eventually, the bank pays to compensate the client for such mistake after the court decides so, with the help of a handwriting expert. This happens although the bank is not responsible for the cheque that was proved to be fraudulent, especially if the expert proves the difficulty to distinguish the counterfeit. In such cases, the court considers that the bank is obliged to cover the cheque value as it is one of the risks of the banking profession. Therefore, the fact that there is a mistake does not discharge the bank of liability unless it was proved that there was a serious negligence on the part of the client. In this case, the negligence is subject to the damage rule and the causality relationship with the concerned mistake.
3- The Adjustment of Bank Interest Rates
In the forms of credit cards and personal loans, the Bank always retains its right to adjust the interest rate and the Bank raises and reduces interest at its discretion. However, in fact, the courts consider that this condition is invalid since the client’s written consent needs to be obtained in order for the bank to be able to adjust the interest rate. Even if this condition was included in the signed agreement, this condition is not regarded as an absolute authorization for the bank to adjust the interest rate. This differs from the loans that are controlled by a specific interest rate that is decided by a certain entity (the Emirates Interbank Offered Rate (EIBOR), a foreign, local, central, commercial or government bank) in addition to a specified percentage.
4- Imposing Periodic Fines
Banks impose periodic fines in case of late payment in addition to the interest, however, such fines shall be at the discretion of the court in any dispute. Moreover, the court may, at the request of the debtor, request a reduction in the value of the fines, particularly in respect of credit cards.
Nour Attorneys & Legal Consultants team represents our clients in a highly professional and timely manner against banks, in order for our clients to be able to get their rights as well as recover any amounts that the bank may have illegally received. You can always contact our team for legal advice and consultation regarding any banking disputes.
August 4, 2021
July 3, 2021