Retiree Triumphs: Court Sides Against Bank

Abu Dhabi Court Rules in Favor of Retiree Against Bank

In the United Arab Emirates, increasing attention is being given to the legal regulation of the relationship between financial institutions and their clients, especially when the clients have retired and their income has significantly decreased. One of the latest and noteworthy examples of this is a court ruling in Abu Dhabi, where a retiree was favored in a disputed loan repayment case. The decision not only settled the situation of the client in a satisfactory manner but also set a precedent for similar cases.

The core of the dispute: excessive deductions from pension

At the center of the case was a home financing contract that transitioned from leasing to ownership, which the client undertook in mid-2022 to purchase a villa in Abu Dhabi's Al Rahba district. The man regularly paid his installments after signing the contract until he retired at the end of the year. However, after his retirement, the bank continued making deductions from his pension at the same amount, ignoring the legal limit that states no more than 30% of income can be deducted for repayment.

Court's decision: the law is on the client's side

The man initially turned to a lower court, which ruled in favor of the bank. He then appealed, and the Abu Dhabi appellate court ruled in his favor. The court found that the bank violated central bank regulations and failed to adapt to the client's changed financial situation. According to the decision, the bank must restructure the outstanding debt in such a way that it does not exceed 30% of the pension.

Legal background: strict rules protect retirees

The regulations underpinning the judgment are based on the UAE Federal Law (Federal Decree-Law No. 14 of 2018), which outlines the operational framework for banks and financial institutions. The law clearly states that banks must verify a client’s ability to repay before granting a loan and require appropriate guarantees. Additionally, Circular No. 9 of 2022 issued by the Central Bank limits the amount of monthly deductions to 30% of salary or pension.

This ceiling applies to all types of loans, whether they follow Islamic principles or conventional structures. However, the exact amount of the deductions must always be adjusted to the current income level, so if someone's pension later increases or decreases, the installment can be adjusted accordingly.

What can someone in a similar situation do?

The Abu Dhabi decision also highlights what clients can do if their bank deducts more than the allowed amount. The first step is to file a written complaint with their own bank while also notifying the UAE Central Bank. If a satisfactory resolution is not reached, the best solution is to pursue legal action with the help of a lawyer or legal firm.

The court made it clear that once a final judgment is reached in such a case, banks are legally obligated to comply. They cannot continue excessive deductions, even if the original agreement stated otherwise. Legal advocates emphasized that the court ruling not only applies to the specific client but is also a precedent that can be cited in all similar cases.

Precedent-Setting and Financial Institutions' Responsibility

The ruling is significant as the court affirmed that Circulars from the Central Bank cannot override federal laws and the constitution. This is important because some banks have previously been inclined to disregard deeper legal obligations by citing circulars.

The appellate decision not only provides justice for the specific client but also sets a direction for financial sector players, prioritizing social responsibility and client-centricity. According to the court, banks should not only provide fair repayment terms at the time of contract signing but also when the client undergoes a significant life change, such as retiring.

Long-term effects of the decision

While the bank still has 30 days to appeal to the highest court (Court of Cassation), the current ruling is already having a noticeable impact on the internal processes of financial institutions. It is expected that banks will review their internal protocols and pay more attention to regularly revising repayment schedules, especially for clients whose income has decreased.

The decision reinforces legal certainty and retiree protection in the UAE, where society is becoming increasingly aware of its financial and legal possibilities. More clients are willing to stand up for their interests if they feel disadvantaged, and this court ruling could further promote this mindset shift.

Summary

The ruling of the Abu Dhabi appellate court sends a clear message: banking practices must be based on law, not merely internal regulations. The case illustrates that justice can protect vulnerable clients and balance the interests of the financial sector and individuals. Protecting retirees is not just a moral but a legal obligation, and now there is a court precedent for it in the UAE.

(The article is based on the decision of the Abu Dhabi appellate court.)