UAE Press: Banks and customers are both responsible for the easy credit 'curse'

The astonishing story of a woman who built up debts of AED700,000 before taking the banks who lent her the money to court, says a lot about consumer habits, our courts system and banking practices in the UAE, an editorial in a local English language daily has said.

According to The National, the woman represented herself in all three cases she brought against financial institutions and while she settled with one bank, the court ruled in her favour in two other cases. Not only was her debt wiped out, but the court ordered the financial institutions to pay her a lump sum in compensation.

The Abu Dhabi-based newspaper said that it has consistently called on banks to end their practices of cold calling and offering large loans and easy credit to customers without making the appropriate checks. "Our hope is that the recent introduction of the Al Etihad Credit Bureau will help curb and curtail irresponsible lending once and for all – and clearly the banks have a lot to answer for in this case – but we also worry that this story might send out some wrong signals."

The National had reported earlier this week that conspicuous consumption is not only an increasing problem, but it can also fuel a greater levels of personal indebtedness and can lead to health and lifestyle issues such as depression and divorce. The woman who took the banks to court, said that she became financially hamstrung because she "got caught up in the life here".

"While she was right to take on the banks over the exorbitant rates of interest they were charging her," the editorial concluded, "a healthier banking and credit system ultimately lies not in court, but in responsible banking practices and in greater financial literacy among customers. It is incumbent on us all, banks included, to understand the value of money."