The Central Bank of the UAE (CBUAE) has made a significant move to eradicate injustice by setting a maximum limit on fees and commissions charged by the banks.
Brought into effect on Tuesday, June 19, expatriates and entrepreneurs living and working in the UAE have welcomed this move, with experts predicting the fee cap will attract more investment and eventually propel the diversification drive in the Emirates.
“This was the need of the hour. I have seen cases where banks acted manipulatively and the end customer was clearly at the receiving end. I strongly believe that this move will work in the favor of the expat population and will boost the growth of the country,” says Puneet Pal Singh Bhalla, a young entrepreneur who works in the microscopes and electronics goods business in the UAE and South Asia.
According to available figures, expats constitute more than 80 percent of the UAE’s population of nearly nine million.
“Many customers are paying exceedingly high interests on personal loans. In many cases, vulnerable customers get trapped in the never-ending cycle of debt. So a cap on the interest rates is clearly the need of the hour. This is a welcome step toward winning the confidence of common people,” says Venugopal Menon, a community lawyer based in Abu Dhabi.
Shielding against unfair practices
This cap sets out the new maximum limits for fees or commissions charged on retail customer service.
“Fee caps are being used as a tool to protect consumers from anti-competitive and unfair practices. This includes ensuring that entities do not automatically default to using the maximum caps when the actual costs are lower and banks will have to justify their increased costs in order to increase fees. If consumers notice incidents of non-compliance, they are urged to notify the Central Bank immediately,” said the CBUAE.
The fee caps apply to consumer-related banking charges, such as home loans and late fees for credit cards. It comes into force as the CBUAE is undertaking more active supervision of the banking sector with the adoption of consumer protection principles.
Are all the parties on the same page?
Before announcing the amendments, the CBUAE held discussions with the banks to ensure that all entities are on the same page. All the banks and financial companies have been instructed to display the new fee caps on their websites.
“Banks have been engaged in an initial round of consultations about the revised CBUAE regulation on fee caps and are comfortable with the extensive benchmarking and transparent nature of the new fee cap mechanism,” adds the CBUAE.
Going forward, fees charged by the banks will be reviewed annually, to ensure that consumers are appropriately protected.