How credit-card debt could land you in Saudi court
In 1928, an American manufacturing company introduced the first example of what has become one of the most popular products for credit financing — the credit card. This little piece of plastic has made life easier for many, especially when they need immediate liquidity.
Since then, banks and financial institutions, in general, have competed to offer the smartest facilities and the greatest benefits to their customers. As a result of this proliferation, consumption has become high, accompanied by many inappropriate uses. These can often lead to an unstoppable cycle of debt and financial obligations.
Of course, in the case of unreasonable use of a credit card, and when the liquidity runs out, the cardholder will be forced to delay payment of the installments, which will eventually lead to the accumulation of interest and other charges.
We all understand the usefulness of credit cards when there is a financial crisis, but their excessive use may become a habit that hinders the proper differentiation between what is necessary and what is merely complementary. That is why credit-card holders should define and limit use to match their level of expenditure with their income. For example, the cardholder may specify the circumstances for using the card, such as when traveling abroad or buying online. By doing so, the cardholder will be more able to repay the debt.
You may wonder about the consequences of not paying credit-card bills. In this case, a delayed payment commission will start to be calculated. This information will be updated in the credit reports of the Saudi Credit Bureau (SIMAH), which has had a strong and clear impact on the Saudi credit information system. Having such negative information in a credit report makes it difficult for a customer to obtain credit facilities from the banks.
If a cardholder fails to pay monthly installments for 90 days from the due date, the situation is known as “default.” The financial institution or the card-issuing bank will stop the holder from using the card immediately after being informed of such default. Under regulations issued by the Saudi Arabian Monetary Agency (SAMA) in 2015, the financial institution is obliged to provide free credit advisory services to the client to deal with these financial difficulties. Many cardholders do not know this.
In the event of any objection or dispute regarding the credit-card account, the financial institution will first try to settle with the customer. If this fails, the dispute will be considered by the SAMA Banking Dispute Committee which deals with disputes between banks and clients.
With the increased temptation to offer credit financing by some banks, SAMA has required credit-card issuers to be more careful and accurate in advertising the advantages of the cards they offer, and to avoid temptation, misinformation and exaggeration in describing these advantages.
This issue may not be a strictly legal one, but if credit-card debt is not dealt with it can often end up in the courtroom, and leads to the world of claims and debts. I advise anyone who uses credit facilities to read more about the regulations that govern financial services — however difficult it may be to resist the temptation of that Hermes bag or a ride in a luxury Lamborghini.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif
