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The debt collectors

Robert Morris

• Last Updated: November 20. 2009 11:31PM UAE / November 20. 2009 7:31PM GMT

Muhammad Siddiqui, left, and Mazin Ajjour, who work in the debt-recovery office of Al Bahar & Associates in Dubai, have reclaimed nearly Dh35 million in overdue invoices in the past two years. Pawan Singh / The National

Often portrayed on the big screen as towering hulks with short fuses and quick fists, the reality is that many debt collectors are far less intimidating. 

Strictly speaking, Muhammad Siddiqui isn’t a street-stalking bounty hunter who stops at nothing to recover debts from unscrupulous individuals. But he is a professional go-to man if someone is seeking to collect money they feel they are owed. 

As collection manager for Al Bahar & Associates’ debt-recovery practice in Dubai, Mr Siddiqui is well versed in the art of reclaiming any amount of money for his firm’s clients. 

The 36-year-old Mr Siddiqui, who joined Al Bahar five years ago, insists that diplomacy, rather than brute force, has helped him and the company’s 20-strong team successfully collect nearly Dh35 million worth of invoices since January 2008. 

It’s probably just as well for a man so far removed from the tough-guy image. 

Standing 5’7” with a slight frame and average build, the soft-spoken Pakistani isn’t an imposing figure – not that he wishes he were. The key to his success is research and determination.

“When we get a claim from a client who says they haven’t been paid, we study it and sort out any documents or evidence needed,” says Mr Siddiqui, who has lived in Dubai for 10 years. “We then try to settle the issue by communicating with the debtor either over the phone or through e-mail. If it’s settled and the debtor pays, we close the file; if not and a dispute arises, we start legal proceedings.”

Mr Siddiqui says Al Bahar charges the creditor 5 per cent of the total amount received from the alleged debtor, which is how he and his colleagues make their money. The firm also charges consultation fees of Dh1,000 per hour to vet a potential claimant’s case, after which it decides whether to go after the money on a client’s behalf.

Other firms, such as Decol, a debt-collection services company that operates out of Dubai’s Deira district, take a harder line if people refuse to cough up what they owe. The business recovers debt for various clients across the UAE, which currently include 23 banks looking to recoup loans and government departments that have provided companies with services and goods. 

Decol’s managing partner, Calum McClure, refuses to name any of the banks and state bodies, or even specify the services the government is seeking payment for, citing confidentiality contracts, but admits his clients are well known. 

According to Mr McClure, Decol’s employees will knock on doors if repeated phone calls and letters fail to draw a response from debtors. “If push comes to shove, a face-to-face approach is sometimes warranted,” he says. “From the first phone call we can tell if it’s going to be difficult or whether people are either willing to accept their responsibility and agree to settle in full or establish a repayment schedule.”

Mr McClure adds he and his staff are sometimes subjected to verbal abuse when confronting debtors in person. “Profanity is the worst thing we have to deal with, but you just ignore that; it shows the character of the individual if they have to resort to that.”

With Dubai-based companies and individuals carrying billions of dollars in debt, the increased demand for cash-collection firms such as Al Bahar and Decol comes as no surprise. Economists estimate that the Dubai Government and its entities, such as Dubai World and Dubai Holdings, owe around $80 billion (Dh293bn) following years of investing in logistics, financial services, real estate, tourism and retail.

The financial landscape in Abu Dhabi, which is among the wealthiest cities in the world, is much more stable. Still, a quick Google search turns up more than 20 debt-collection firms operating in the cash-rich capital. Meanwhile, online directory Yellow Pages throws up 31 results for collection agencies in the UAE. 

Mazin Ajjour, a legal consultant and partner with Al Bahar’s litigation department, estimates that last December, the firm received more than 800 calls or e-mails, mostly from property developers and homeowners. He adds that it would normally take six months for Al Bahar to receive that number of enquiries from prospective clients – but these are not normal times. 

“I have been practicing here in the UAE since 1990, and the number of cases, collections and bounced cheques stayed the same during that period,” Mr Ajjour says. “But at the end of 2008, everyone panicked. In the financial crisis everyone thought people who owed them money would run away, so they were eager to get their cash back. On the other side, those who owe the money want to wait for the economy to pick up before paying, so all this has led to more claims.”

When speaking to The National earlier this year, Al Mal Capital banking analyst Deepak Tolani said the UAE’s financial infrastructure and lack of bankruptcy laws was prompting people like Mr Fisher to abandon their debts. “You’re forced to pay the debt or leave the country. Otherwise, you end up in jail.” 

Personal hardship aside, some cases simply involve less than honest company heads or individuals who quite happily cut and run after racking up huge debts. But irrespective of the circumstances, the number of disputes is rising even if the odds of reclaiming debt in the UAE remain low. This is particularly true for disputes that involve small, opportunist businesses. 

“It’s difficult to get money from companies that come here, set up shop and then quickly shut down,” Mr Ajjour says. “We saw lots of property developers setting up here recently to make money. They made their cash [from off-plan sales] and then when the crisis came they left their clients, shut down the offices and ran away.” 

In one instance, Mr Ajjour recalls two individuals posing as founders of a property management company. For client confidentiality reasons, he doesn’t divulge much detail as he recounts the story, in which the men, acting on behalf of the property owner, handled short-term tenancy agreements for an apartment block in Dubai. 

Unbeknownst to the owner, the partners drafted annual contracts, charging tenants in 15 flats around Dh200,000 each at the height of the property boom. When the market crashed, the pair left Dubai in late 2008 with everyone’s cash, leaving the owner to clean up the mess. 

“The building was for short-term stays, so the owner of the apartment block was expecting monthly payments from the tenants, not realising this handling company had issued one-year contracts,” Mr Ajjour says. “Tenants came to us asking if we could file a claim, but against whom?”

Similar tales of woe are familiar to companies such as Sharjah-based Hadaf Al Khaleej Debt Collection. The firm’s sales and marketing manager, Shiyas Mohammad, admits recouping money from alleged fraudsters is sometimes near impossible, especially when the debtors have lied and cheated to get their hands on someone’s hard-earned cash. Nevertheless, he insists creditors should consult experts, even if the chances of reclaiming the money are slim. 

Mr Mohammad outlines the debt-recovery process for The National as he would for a potential client. He suggests first that we send the invoices and e-mail correspondence with the debtor to his company. 

He says that Hadaf Al Khaleej, which has a satellite office in Abu Dhabi, can ascertain whether or not it has a case after reviewing these documents. If the answer is yes, we then have to sign over power of attorney to Hadaf Al Khaleej, giving the debt collector permission to chase money on our behalf. 

If the debtor in our hypothetical dispute agrees to settle outside of court after being contacted by Hadaf, we will pay the company 20 per cent of the sum received. But Mr Mohammad tells us disputed cases can take at least six months to settle, especially if they go to court.

Al Bahar offers similar advice to anyone seeking help to reclaim money from unpaid invoices. And Mr Ajjour says creditors are always warned to expect a long, expensive battle if they decide to take legal action. Companies or individuals determined to pursue debtors will have to go through several stages to mount a case. Explaining the procedure, Mr Ajjour says the first step is to investigate a creditor’s claim to see whether the person or company is indeed owed money. Al Bahar’s lawyers sift through invoices proving the claimant and debtor agreed a fee for any work or services, and once the claim has been verified the firm notifies the debtor by phone and in writing and attempts to resolve the dispute out of court by arranging a sit-down meeting between the parties. 

If the grievance remains unresolved, Al Bahar begins, as a last resort, legal proceedings. And court fees alone can prove expensive; plaintiffs in Dubai pay 7.5 per cent of the amount they claim they are owed, and Abu Dhabi claimants pay 4.5 per cent. All documents relating to the conflict must be translated into Arabic, which costs between Dh60 and Dh70 per page, while lawyer fees also add to the expenditure. If that isn’t enough to put people off, then the claimant may have to foot the debtor’s portion of the bill if the case goes in the latter’s favour. 

Financial costs aside, claimants should also consider the time and effort needed to fight a case in local courts. Compiling all invoices and documentation and sending them to the court can take between 10 and 20 days, with a further 10 days needed for translating paperwork into Arabic. At this point, Al Bahar registers the case at court and awaits a hearing date. In the meantime, the debtor is notified about the proceedings and given a chance to put a case together. 

If the dispute reaches this stage, Al Bahar will have phoned the debtor to explain the situation in a friendly manner before serving legal notices. “The debtors sometimes call us liars, say they want to negotiate, or tell us the disputed amount isn’t right,” Mr Siddiqui says. “We get letters and calls denying everything, so we tell them to come for a meeting to clear up the matter.”

Remaining polite and courteous may be Al Bahar’s approach, but it’s certainly not how at least one UAE bank operates, according to an unhappy customer. An Australian woman, who wishes to remain anonymous, claims she and her husband were recently “hassled” by HSBC after their current account went overdrawn by Dh37. 

“We had three calls from the bank to make sure we put the money back,” she says.

The Dubai-based woman, who has lived in the emirate for three years, adds the matter was quickly settled after she transferred funds from the savings to current account. But she did not appreciate receiving “irritating” calls for such a small amount. 

Last month Shayne Nelson, chief executive of Standard Chartered bank, said that local banks were struggling to cope with a near $11 billion liquidity shortfall from unsecured loans – perhaps explaining HSBC’s urgency to recoup Dh37. 

While local banks have no intention of letting customers walk away without making good on their debts, Al Bahar’s Mr Ajjour suggests some creditors may be better off doing just that. In some cases, claimants are hoping for a quick payout of their money from debtors to pay rent or put food on the table. But with high legal costs and lengthy court proceedings, he believes it’s sometimes easier to walk away.

If you still want to do all you can to try to recoup your money, even if it has fled the country, Mr Ajjour does have connections abroad.

“We do chase people even if they have left the UAE,” he says. In criminal cases in which someone has procured cash through false pretences, Al Bahar hands matters over to Interpol, the international crime organisation. The more straightforward and non-criminal disputes often involve businesses outside this region that haven’t paid invoices to UAE-based companies in a timely manner. 

“It takes time [to recoup debt from companies outside the UAE] which is not ideal if you need money to live on here,” he says. “If, for example, someone takes Dh100,000 from you and leaves, you can go to a lawyer, but the costs will soon start mounting up, so it might be better to forget it.”