Cheques are still widely used as payment instruments, despite the fact that digitalization is causing the operation of the banking system to undergo significant transformation. When they are utilized in the appropriate manner, cheques are quite easy to use.
The possibility of having a cheque is one of the problematic aspects associated with the use of cheques. In the United Arab Emirates (UAE), the legislation of a bounced cheque used to specify that anyone who issued a cheque that was later dishonored would be subject to criminal prosecution.
However, new legislation will be enforced beginning in January 2022. According to this law, the account holder of a bounced cheque will not be subject to criminal prosecution, but they will be required to pay fines instead. Forgery, giving an instruction to stop payment, taking a cheque out of an account just before a check is cashed, and other similar behaviors could result in criminal charges being brought against the perpetrator.
There is a new provision for partial payments of cheques in the recently enacted Federal Law No. (14) of 2020 Amending Certain Provisions of the Federal Law No. (18) of 1993 Concerning the Commercial Transaction Law. This provision was added to the law in order to address the issue of cheques.
Partial payment of cheques in the UAE
In the past, the cheque would be returned unpaid when there were insufficient funds in the account, and the owner of the account would be prosecuted for the offense of passing a bounced cheque. According to the new legislation, the person to whom the cheque is addressed is now permitted, in the event that there are insufficient funds in the account, to withdraw any available funds from the account and keep the cheque for their own use up until the point at which the full amount of the cheque is paid off. In the UAE, the minimum amount that is allowed for the partial payment of cheques is 5 percent of the total amount.
If the cheque is returned to you because there are insufficient money in your account, you can go to the branch of the bank and ask for a partial payment. This new regulation must be followed by every single person and every single business in the UAE. This provides the cheque issuer with some breathing room in order to credit the account with adequate funds.
It is essential to be aware that the cheque can only be cashed within the allotted time frame of 180 days. It is the responsibility of the person to whom the cheque is directed to cash it within the allotted time frame of six months, failing which the check would be considered void.
In the United Arab Emirates, a charge of 5 AED will be levied against the cheque’s issuer for each partial payment made with the cheque. The recipient will not be responsible for paying any fees.
Steps to encash the cheque for partial payments in the UAE
- To begin, the person who is the beneficiary of the cheque might go to the bank to cash the cheque.
- If the cheque is returned because there are insufficient funds in the account, the bearer of the cheque can take the original cheque along with a note stating that there are insufficient funds, as well as an Emirates ID and a Trade License (if the beneficiary is a company)
- Pay a visit to the branch of the bank the cheque is drawn on and ask for the partial payment. For instance, if the cheque that was given to you was issued by bank ABC, then you will need to go to bank ABC.
- After the beneficiary has made the partial payment in accordance with the instructions printed on the cheque, they will receive the original cheque back along with the partial payment certificate. This certificate will contain details regarding the total payment, the remaining payment, and the payment that has already been made.
- Following the completion of one portion of the partial payment, the recipient is required to return to the bank and repeat the previous processes in order to complete the remaining payments.
Frequently Asked Questions
Q. Will the cheque issuer be informed about partial payments made from the account?
A. Yes. Regarding the partial payment of the cheque, the account user will receive a message on the cellphone number that is registered with the account.
Q. What happens to the bounced cheque case filed before the new law has come into action?
A. Depending on the circumstances, the instances of bounced checks that were filed in the UAE before the new law went into effect may be eligible for decriminalization. In order to avoid criminal prosecution, the person who issued the cheque must go to the local police station and inquire about the situation.
Q. What if the cheque becomes invalid before the payment is done?
A. If the cheque becomes invalid or expires before the money is fully paid, then the beneficiary is responsible for obtaining a new cheque from the entity that issued the original check.
Q. Is the partial payment of cheque available at all the banks in the UAE?
A. Yes. The new regulation will be adhered to by each and every bank that is a member of the Central Bank of the UAE. This is already standard procedure at all of the financial institutions in the UAE, including Mashreq, HSBC, Emirates NBD, and others.