I opened a checking account with a local bank in September 2015. However, I closed the account in 2019 and received the full balance in cash.
In April 2019 I emailed the bank to check if the account had been closed and they confirmed it had been in their response.
Over the past two years, I have tried to apply for a credit card, but the application has been rejected several times. I have since found out that the bank is claiming that I defaulted on the overdraft facility of the closed account of Dh4 ($1.08).
I have no idea how come I owe 4 Dh to the bank. The bank never told me about it either and I only found out when I requested a credit report from Al Etihad Credit Bureau.
I don’t understand why the bank didn’t deduct the Dh4 from the account balance when I closed it. The bank also never contacted me to claim the money.
How can I refund the Dh4 and remove myself from the defaulters list? Also, will I be able to restore my credit score with such a ridiculously small sum of money? Sir, Dubai
Debt Speaker 1: Sameh Awadallah, Acting Global Head of Retail Banking at Islamic Bank Abu Dhabi
The first step you should take is to contact the bank and discuss the matter. Inform them of your situation and highlight your intention to apply for a credit card that is hindered due to an overdraft of 4 Dhs and that you are ready to settle.
Please note that an overdraft does not charge any interest. Funds in a current account are always made available to the account holder when needed, and to compensate for the additional liquidity provided by the bank, no interest is also charged on current accounts.
In your case, the overdraft may have occurred due to a lack of money in your account to cover a transaction or withdrawal, but the bank authorized the transaction and charged the fee accordingly.
Try to repay what you owe as soon as possible. Once you have achieved this, the defect will be marked as “satisfied” on your credit file, which will help you with future credit applications.
Banks offer overdrafts as short-term financing to customers. While the term of a personal loan is of a longer duration – up to five to seven years – the term of an overdraft facility is of a shorter period and is usually settled within a year.
Eventually, you will have to repay the overdraft regardless of the amount. The way banks try to encourage this is to reduce the maximum overdraft by zero percent each year – the idea being that by the time the zero percent ends, you will have paid it off.
Failure to pay overdraft fees could lead to a number of negative consequences.
The bank could close your account or take collection or other legal action against you depending on the amount in default. It could also signal your default, which could make it difficult to access a bank’s services in the future and possibly affect your credit profile.
Debt 2 Panelist: Jaya Ratnani, Managing Partner at Freed Financial Services
When applying for financial credit, one of the most important documents for approval is the Al Etihad Consumer Credit Bureau report.
This report shows a person’s financial obligations and helps banks assess your creditworthiness. Based on your repayment history and defaults, your overall credit score is determined. Even a small overdue amount of Dh4 can have a negative effect on your AECB rating.
As a general rule, you should always request an authorization letter once an account or liability closure request has been processed to ensure that there are no further charges to pay. Since you did not receive a letter, the Dh4 appears as a delay in your report.
In your case, the following steps are recommended:
1. Approach the bank and request a waiver of all fees
2. Based on the confirmation email you received from the bank, the bank should consider this waiver
3. Ask for a letter of disclaimer from the bank
4. Give the bank 30 days to report the account closure to the AELC
5. Review your personal AECB credit score after 30-45 days to ensure the default has been removed and your new score is correct.
In the meantime, if you are applying for a credit card facility, you can provide the bank with justification for these charges and the credit reporting team can review your case for approval.
Alternatively, you can wait for the AECB report to reflect the account closure and reapply for the credit card.
Debt 3 Panelist: Alison Soltani, Founder of Leap savvy savers
It is frustrating that you have been rejected for a credit card and your credit score has been affected by a Dh4 charge that you were unaware of.
It could be a timing issue – a vendor hasn’t accepted a payment before the bank has completed the process of closing the account, or for such a small amount it could be a system error.
In the future, it’s worth not charging a debit card attached to an account you want to close for several days before initiating the closing process to avoid having unpaid charges on the account after it’s closed. .
The first step is to try to settle the dispute directly with the bank. If the situation is still unresolved after your initial contact, file a formal complaint through the bank’s complaint channels, submitting the email you received and any closing balance statements you may still have as supporting documents.
If the bank does not cooperate, does not settle the complaint within 30 days or in case it has added interest to the Dh4 charges, you can file a complaint with the Central Bank of the United Arab Emirates via its website.
You will need supporting documents, such as a complaint reference number with your bank and possibly the email confirming the closure of the account.
The Central Bank’s Consumer Protection Department will contact you once you register the complaint to let you know what action they will take.
When you have resolved the case with the bank and cleared the error, contact the AECB to raise a dispute. There is a data correction request form you can fill out on their website, or you can call them on 800 287 328 or visit any of their offices in Abu Dhabi and Dubai.
When the AECB receives information from the bank regarding the error, it will update your credit file, which will automatically change your credit score.
Be aware that the process can be long and your repeated credit card applications can affect your credit report.
However, there are strategies to improve your credit score while you resolve the Dh4 dispute.
Make sure all bills, fees, and loan payments are made on time, and limit the number of accounts, cards, and loan applications you make in a short period of time.
Also, do not use the maximum amount of any existing credit you have. For example, if you have a credit card with a limit of 10,000 Dh, it will be an advantage if you use 3,000 to 4,000 Dh per month and pay it back in full.
You can also apply to become an authorized user on a tax-responsible partner card, which will have a positive effect on your credit report.
The Debt Panel is a weekly column to help readers manage their debts more effectively. If you have a question for the panel, write to [email protected]
Updated: March 02, 2022, 05:34