What to Do if Bank Freezes Final Settlement After Switching Jobs
Suppose this were to happen: you lose your job and find another one that pays less, so you immediately intimate your bank of the change in employment and find your final settlement frozen just because the new employer is not listed with the bank. You have enough salary coming in from your new job to service the installments on your existing loans, yet the bank will have nothing of releasing your dues.

This is not an isolated incident in the UAE, and if this were your case, then it’s time to know about your rights and options. So, can your bank, legally, withhold your end-of-service entitlements or final settlement in this context? Let’s break it down.

Understanding the Bank’s Actions
The basis on which the bank will freeze your funds, even when you are still able to service your loan obligations, usually rests on the terms of the loan agreement you signed. This, in turn, means your options are going to largely depend on what the details of your agreement show. Two possible scenarios exist:

Scenario 1: Contractual Provisions Allowing the Freeze
Sometimes, your loan agreement can specify that you need to draw at least a certain minimum monthly salary as a prerequisite for the loan. This is typically employed as a kind of guarantee that gives assurance in particular of your capability to repay the loan amount taken in advance. If your monthly salary drops below this minimum value, the bank may trigger a clause that enables them to freeze your final settlement, whether or not you are in default on the loan payments.

In this case, the bank can legally hold on to the final settlement depending upon the conditions of the contract between them. Laws in UAE like Article 715 of UAE Civil Transactions Law permits allowing a loan to be tagged along with the condition of security, pledge, or mortgage.

In other words, if these are the conditions in your agreement, then the bank is not in contravention of UAE law and/or public order. This therefore will give the bank the right to lawfully deduct or freeze your settlement, as they approved the loan at a salary level that they considered adequate to protect their interests.

Scenario 2: There Are No Such Contractual Provisions
It may not be legally justified for the bank to hold the final settlement if there were no clauses in the loan agreement related to the minimum salary requirement or any clause that allows the bank to withhold your final settlement upon a decrease in salary.

In this regard, the bank shall not freeze your final settlement in case:
• You are not in default of your loan obligations, and
• Your new salary is still sufficient to pay the monthly installments of the loan.

If both of the above exist, then you have enough reason to approach the bank to unfreeze your account. You may need to approach the bank with proof that your new salary can still meet your loan obligations. It is also likely that even now, the bank may offer to restructure the loan in view of change in your salary. This may sound superfluous, but the restructuring can actually offer an opportunity to cut down on your monthly payments, making it easier for you to be able to afford it longer term.

What Should You Do If the Bank Refuses to Release Your Settlement?
If, in case of a bank continuing not to release your end-of-service entitlements despite approaching them to resolve the matter, you may do the following:
• Review Your Loan Agreement: Check your agreement for any clauses that enable the bank to apply this action. Look at every word regarding salary requirements or end-of-service payments being in the nature of collaterals.
• Approach the Bank: Write to the bank while providing proof of your current salary and financial ability with which to service the loan.
• Loan Restructuring: You can also demand loan restructuring according to your revised salary. This is either an extension of the tenure of the loan or the amount you pay every month.
• Lodge a Complaint: If, after all, the bank does not release your settlement, you can file a formal complaint to the Central Bank of the UAE or to Sanadak, the UAE’s consumer protection platform. Your complaint should mention your right to have your money returned based on the UAE Civil Transactions Law and what the bank is supposed to do based on the regulations and guidelines on consumer protection by the Central Bank.

Protecting Your Future
It always pays to be one step ahead, and as transparent as possible with your bank when there is a significant change in the status of employment or income. This may reduce chances of funds freezing for an unknown reason. Secondly, read your loan agreement in detail before signing, making sure you know what rights the bank has, and what you are obliged to do.

Conclusion
Whether your bank has legal rights to withhold your final settlement in case of a job change is, of course, a matter of the exact contractual terms agreed upon between you and the bank. In that case, if there is a provision in the contract stating that they could freeze one’s funds due to a salary decrease, then they can be considered justified. In the absence of this, it may not be justified for the bank to freeze your funds if the salary is sufficient to cover installments on a monthly basis.

In such a case, one would be advised to consult with an attorney who can best discuss and make the proper decision regarding one’s rights. For a situation like this, at LYLawyers, we can represent you in court due to the financial situation presented and give you the legal representation needed to settle your case. Feel free to call us today and book your appointment so that we may take you through such woes.