‘Will a bounced cheque affect my UAE credit score?’

Question: My bank recently rejected a cheque, saying my signature did not match the one on their records. It’s the first cheque I have written in a few years, so I am not surprised and I provided a replacement, which was fine.

I have now read that a bounced cheque could affect my credit score in the UAE. I plan to take out a mortgage soon and am worried this could make it harder. Is that true? TB, Dubai

Answer: A cheque rejected because the signature did not match the bank’s records is classed as a “technical reason” and is not a financial default. This means it will not negatively affect a person’s credit score with the Al Etihad Credit Bureau, the UAE’s credit agency.

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A cheque that is rejected for signature is not treated as a bounced cheque under criminal or civil penalty rules and there are no legal penalties or consequences.

Banks still record the event internally and too many similar incidents can be considered a risk, but this is not the case here.

The situation is different when a cheque is returned unpaid due to insufficient funds or a blocked account. Those situations create a negative entry and reduce a credit score, which can impact the ability to borrow money.

Q: I have a job offer for a role in Riyadh and the offer letter refers to a non-compete clause. The contract states that I cannot work for another company in the country for a whole year if I leave. Is this legal? JM, UAE

A: If the role gives an employee access to confidential or commercially sensitive information, the employer can include a clause in the contract that prevents sharing that information after you leave the company. This is perfectly legal, but only if the restriction is clearly written in your contract and sets reasonable limits. It cannot be a blanket exemption.

Article 83 of Saudi Arabia labour law states: “If the work assigned to the worker allows him to get acquainted with the employer’s clients, the employer may, for the protection of his legitimate interests, require the worker not to compete with him upon termination of the contract. For this condition to be valid, it shall be in writing and specific, in terms of time, place and type of work. The validity of such condition shall not exceed two years from the date of termination of the relationship between the two parties.”

The intention is to stop someone from moving directly to a competitor and taking clients or company secrets.

The legislation is intended to protect genuine business interests, not to prevent career progression, and should be reasonable. Such clauses should be in the contract of employment from the outset and agreed by both parties.

JM should request an amendment to the contract wording to make it clear that the non-compete clause is not a total ban but follows employment legislation.

Q: In a few months’ time, I will be leaving the UAE after many years and want to close my bank account. However, I have heard stories that this process is hard and involves delays. I don’t want to tell my bank too soon as I still need the account and don’t want them to freeze it. How soon do I need to let them know and what else do I need to do? ST, Dubai

A: While the procedure can vary between banks, it is broadly similar. In most cases, it is advisable to visit a bank branch and complete an account closing form. Doing this in person makes the intent clear and allows an individual to clarify procedures.

Assuming there are no liabilities, such as an outstanding loan, the branch staff should be able to complete all the formalities on the spot and any balance in the account should be paid immediately in cash at the cashier counter.

The situation is complicated if there are any debts as they must be repaid in full before the main account can be closed.

If a person has a credit card, these are not closed immediately as there can be pending transactions and/or compliance checks. In this region, the compliance checks can take up to 60 days in certain cases, so it is wise to separately close a credit card account some time before intended departure.

A bank account can remain valid until a few days before leaving the UAE. It is best to close all accounts before permanent departure as closing an account remotely is not easy.

An account that remains open, even if unused, can accrue fees and charges, leading to future complications.

Contact Keren Bobker at keren@holbornassets.com or at www.financialuae.com. The advice provided in our columns does not constitute legal advice and is provided for information only

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