Gulf Law at Gulf Today 31 July 2015

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OFWs advised to be cautious on credit cards
By Mariecar Jara-PuyodJuly 31, 2015
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DUBAI: Simply do the maths and know very well how to manage finances.

These tips are from Dubai-based Atty Barney Almazar in the midst of the lure and glare of credit cards and bank loans.

The Gulf Today interviewed the Gulf Law-Corporate Commercial Department director as the law firm, which has been offering free legal aid to Filipinos around the UAE in the past few years, would be hosting a free seminar on “Credit Cards and Bank Loans” at the Philippine Consulate General in Al Qusais, Dubai on Aug. 7, Friday, from 7 am to 2:30 pm.

The author of the “Essential OFW (Overseas Filipino Worker) Guide to the UAE,” released during the June 12 Philippine Independence Day celebrations in the country, said, “OFWs must be able to manage their finances properly. Obtaining loans is not bad. However, they should first compute how much their monthly income is and how much will their monthly amortisation be for their loan payments.”

“Generally, the maximum loan payments must not exceed half the salary,” Almazar pointed out.

He added, “We advise our clients to ensure that they are in the position to pay back the loan, whether they are using the proceeds to finance a necessity or just for leisure.” 

Fifteen per cent of the OFWs who seek advice on how to clear themselves of their bank loans or credit card debts “have loan payments bigger than their monthly salaries.” 

“Most get into trouble simply because they just obtain loans without doing the necessary calculations if they can afford the monthly payments,” Almazar said.

He also said, “Some do not even know how much the interest rate or how long their payment term is.”

The reasons why OFWs go for bank loans are education or school needs, medical expenses, down payment for a house and lot or a condominium unit, investment, wedding, house rent and vacation.

Almazar said the credit card “is the most common type of loan secured by Filipinos in the UAE.”

The plastic money is normally for “personal consumption such as for the purchase of clothing, jewellery, gadgets, dining and travel.”

Almazar implied that OFWs have to be wise and prudent regarding money matters and as much as possible un-learn compulsive buying. 

He said, “My observation is the majority have no actual need to spend. But, because of the available loan facilities, they will apply for credit cards and use the money to buy things they do not really need.”

“When the time comes that there is an actual need for money such as an emergency back home, they will take a loan again. Sadly, the loans become unmanageable,” Almazar added.

Consequently, the vicious cycle or habit of acquiring loans in order to pay the existing one becomes the norm.  

Referring to bank loans, Almazar reverted to the medical needs as the reason and cited the hospitalisation of a parent: “For example the OFW needs Dhs50,000. If the bank approves Dhs65,000, he will consume the excess for other items.”

Almazar continued, “There are even instances when OFWs have to come up with what to purchase using their excess cash.”

On the rights and obligations of credit card users and applicants of approved bank loans, he said, “They have the right to know the applicable fees, charges and other payments associated with their loans.”

Defaulters have the right not to be “harassed, shouted at or be insulted over the phone” by loan collectors.

While defaulters and those who have entered into agreements for loan settlements are reported to the UAE Central Bank (CB), “banks are also prohibited from sharing the loan information to third parties.” 

“Thus, the bank is violating the (CB) rules if the collecting agent will disclose the unpaid loan details of a person to his employer in the hope of recovering payment. Bank information is confidential,” Almazar said.

Defaulters reported to the CB will be unable to secure another set of loans “until they have proven their credit worthiness.”

The lawyer advised that it is best for all applicants seeking new bank loans to be honest regarding their financial status and existing loans, “In practice, loan agents will encourage them not to disclose all existing loans so that the bank will not reject their application.”

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