UAE: Late Payment Fees up to 60% by Installment Companies

Dealers collaborating with installment companies have raised concerns regarding the exorbitant late payment fees imposed, which can range from 40 to 60% of the installment value and are applied monthly for each delay.

This practice results in a significant increase in the amounts owed, even for relatively modest purchases such as clothing, household items, or groceries.

They have urged for regulations to be established for these companies, as they often operate based on their own terms without considering the circumstances of the client or implementing reasonable late payment rates.

In response, two banking professionals have indicated that the upcoming period will see efforts to regulate the operations of these companies, subjecting them to oversight by relevant authorities. They advise dealers to thoroughly review the terms and conditions before engaging with such companies to avoid excessive fees or potential disputes.

An anonymous customer questioned the rationale behind being charged a monthly late fee of 25 dirhams for a delayed payment of an installment worth 79 dirhams, emphasizing the disproportionate nature of the penalty.

Another dealer shared a similar experience, highlighting that a late fee of 25 dirhams is imposed on a monthly installment of 40 dirhams, surpassing 60% of the original installment value.

Yet another customer, also opting to remain anonymous, recounted being subjected to a fixed late fee of 25 dirhams for a 30-dirham installment, regardless of the relatively low amount.

Banker Ali Saad Al-Din underscored the need for customers to recognize the limited protections afforded when dealing with these online-based companies, emphasizing that high fees in case of delays are common due to the absence of interest charges.

Banker Amina Ibrahim emphasized the importance of customers carefully reviewing and understanding the terms, fees, and conditions associated with installment purchases, cautioning against complacency and emphasizing the potential for fees to accumulate over time, ultimately leading to default.

Both bankers reiterated the imminent regulatory measures aimed at ensuring accountability and transparency in the operations of these installment companies, with the Central Bank expected to play a significant supervisory role.

Read also: UAE Court Rejects Employee Lawsuit Over Unauthorized Credit Card Usage

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