Bounced cheques in the UAE: the law after the 2022 reforms

Since 2 January 2022, a cheque that bounces only because the account is short is not a crime in the UAE. The bank must pay what the account holds, and the holder can enforce the rest directly through the execution court. Bad-faith acts, such as stopping payment without legal grounds or emptying the account, are still crimes: 6 months to 2 years in prison, a fine, or both.

Key takeaways

• Since 2 January 2022, a cheque returned for insufficient funds is a civil matter unless bad faith or another cheque offence is involved.
• If the account holds less than the cheque amount, the bank must pay what is there, unless the holder refuses.
• A bounced cheque is an executive document: the holder can go straight to the execution court without filing a lawsuit.
• Stopping payment without legal grounds, closing or emptying the account, or signing a cheque so it cannot be cashed can bring 6 months to 2 years in prison.
• Returned cheques stay on your credit report for up to 5 years, and repeated returns can lead to your accounts being closed.

This guide covers cheques only. If you are behind on a loan or card, start with what happens after missed payments; if you plan to move abroad, see leaving the UAE with debt. Our other Debt help guides cover collections and settlements.

What changed on 2 January 2022

Issuing a cheque without enough funds stopped being a crime in itself on 2 January 2022. Federal Decree-Law No. 14 of 2020, whose cheque rules the Central Bank and the Ministries of Economy and Justice announced on 1 November 2021, limited criminal liability to bad faith and other cheque crimes, made partial payment mandatory and let the holder enforce a returned cheque directly.

Bounced cheques decriminalised

2 Jan 2022

From 2 January 2022, Federal Decree-Law No. 14 of 2020 narrowed criminal liability for cheques returned for insufficient funds to cases of bad faith and other cheque crimes, and made partial payment of cheques mandatory.

The Central Bank’s Q&A on the amendments says the Penal Code articles on cheques without funds were abolished. The acts that remain crimes now sit in the Commercial Transactions Law issued by Federal Decree-Law No. 50 of 2022, and the article numbers below refer to it. Older articles and news reports that describe prison for any bounced cheque predate the reform.

What happens when a cheque bounces

The bank pays whatever the account holds, marks the cheque, reports the account holder to the Central Bank and returns the cheque so the holder can enforce the rest.

The bank must pay what is in the account

Partial payment is no longer optional:

Partial payment

Mandatory

If the drawer's account holds less than the cheque amount, the bank must pay what is available unless the holder refuses, annotate the cheque, and give the holder the original cheque and a certificate of payment.

According to the Central Bank’s Q&A, the holder can present the same cheque again later, as many times as needed, to collect more, or refuse the partial payment and pursue the full amount.

The bank reports the cheque

The bank must report the account holder’s details to the Central Bank when the account lacks funds on the cheque’s date, when the writer withdraws all the funds after issuing it, or when the bank pays only part of it (Article 648(3)). The Central Bank’s Q&A says returned and partly paid cheques reach the Etihad Credit Bureau (AECB) through the usual credit reporting channel.

How long a bounced cheque stays on your report

Up to 5 years

Defaults, missed payments and bounced cheques stay on the credit report for up to 5 years, even after the amount is settled.

Any lender that checks your report will see it. Our guide to reading your AECB credit report shows where returned cheques appear, and you can check your AECB report to see what has been reported.

The holder can enforce it directly

The returned cheque is enough to start enforcement:

A bounced cheque is an executive document

Direct enforcement

A cheque marked by the bank as unpaid for insufficient or no balance is an executive document: the holder can ask the execution court to enforce it, in whole or in part, without first filing a lawsuit.

The Central Bank’s Q&A explains that the holder applies to the execution judge to have the enforcement wording placed on the cheque; enforcement then follows the Civil Procedure Law. In Abu Dhabi, the Judicial Department lists the requests an enforcement file can contain: seizure of bank accounts or property, a salary deduction, a travel ban, or contacting an external authority. A request to pay in instalments or to postpone enforcement can also be made, with supporting evidence, and goes to the enforcement judge.

Accounts closed after repeated returns

Repeated returns can cost you your accounts. The Central Bank’s Q&A on the cheque amendments describes Central Bank instructions to banks:

Account closure after returned cheques

4 returned cheques in a year

The Central Bank's instructions, as described in its Q&A on the cheque amendments, require a person's accounts to be closed for two years when at least four of their cheques are returned for insufficient funds within one year, and for three years if it happens again, with their unused cheques recovered.

The year is counted from the first returned cheque to the fourth.

Which cheque acts are still crimes

Two groups of acts can still lead to prison: bad-faith acts that stop a cheque being paid, and forgery or misuse. Paying or settling before a final judgment ends a bad-faith case. The law also fines anyone who endorses a cheque to someone else, or hands over a cheque payable to the bearer, knowing it cannot be paid (Article 674), and penalises bank-side failures such as refusing a partial payment or its certificate (Article 673).

Bad-faith acts by the person who wrote the cheque

Article 675 lists three acts:

• telling the bank, before the cheque is cashed, not to pay it, outside the cases the law allows;
• closing the account, withdrawing its whole balance or deliberately getting it frozen, or knowing it was closed before the cheque was issued or presented;
• writing or signing a cheque on purpose so that it cannot be cashed.

Penalty for bad-faith cheque offences

6 months to 2 years

Telling the bank not to pay your own cheque in cases the law does not allow, closing or emptying the account, deliberately getting it frozen, or writing a cheque so it cannot be cashed remains a crime: 6 months to 2 years in prison and/or a fine of at least 10% of the cheque value (minimum AED 5,000) up to double the value.

Penalties double for repeat offences. Whether bad faith is proven is for the court to decide on the evidence; the Central Bank’s Q&A says the acts above prove it.

Worked example

A cheque for AED 12,000, two outcomes

The amounts are illustrations.

1. The cheque is presented on its date and the account holds AED 7,500. Unless the holder refuses, the bank pays AED 7,500, notes it on the cheque and hands over the original cheque with a payment certificate.
2. Amount still owed: AED 12,000 minus AED 7,500 = AED 4,500. The holder can enforce the AED 4,500 through the execution court. No crime is involved.
3. Now suppose the writer had closed the account before the cheque was presented. That is a bad-faith act under Article 675.
4. Lowest fine: 10% × AED 12,000 = AED 1,200, which is below the AED 5,000 minimum, so the floor is AED 5,000.
5. Highest fine: 2 × AED 12,000 = AED 24,000.
6. The criminal case does not stop the holder pursuing the AED 12,000 through the courts, and if the writer pays it before compulsory enforcement starts or before a final judgment, the case ends.

In the second case the writer faces a fine of AED 5,000 to AED 24,000, 6 months to 2 years in prison, or both.

Forgery and misuse

Forging a cheque, knowingly using a forged one or accepting money paid through one, or using a valid cheque in someone else’s name, unlawfully or in a fraud, is a more serious crime under Article 676.

Penalty for cheque forgery and misuse

At least 1 year

Forging or fabricating a cheque, knowingly using a forged cheque or accepting money paid through one, or using a valid cheque in another person's name, unlawfully or in connection with a fraud, is punishable by at least one year in prison and a fine of AED 20,000 to AED 100,000.

Here prison and the fine both apply. The rule that payment ends a case covers the bad-faith acts, not forgery.

Extra penalties a court can add

On a conviction, a court can also take away the means to repeat the offence.

Cheque book ban

Up to 5 years

On a conviction for certain cheque offences, the court may withdraw the person's cheque book and bar them from new cheque books for up to 5 years.

Ban on a business or professional activity

Up to 3 years

When a court convicts someone of a cheque offence under Articles 673 to 677, it may bar them from a commercial or professional activity for up to 3 years if the offence was committed through that activity.

The court may also order a summary of the judgment published at the convicted person’s expense, and must do so for a repeat offence or forgery (Article 678).

When a criminal case ends

Under Article 684, a bad-faith case ends if the full or remaining value of the cheque is paid before compulsory enforcement starts, or if the parties reconcile or the value is paid before a final judgment. Reconciliation after a final judgment suspends the penalty. If the cheque was for a bank debt you cannot cover, our guide to negotiating with your bank explains restructuring and settlement.

Security cheques for loans and cards

A security cheque is a post-dated cheque a lender holds against your repayments. The law has no separate category for it: it can be presented from its date, enforced if it bounces and stopped only in the narrow cases below.

What a lender may hold

Maximum value of security cheques

120%

Lenders may take only post-dated cheques that cover the instalments, worth no more than 120% of the loan or debit balance.

Signed blank cheques are prohibited. The lender must give you a stamped photocopy of every cheque it holds as proof, and before it grants the loan or card it must explain what pledging post-dated cheques means for you (Consumer Protection Standards 7.1.1.5 and 7.1.1.8). Keep the copies. For how lenders use these cheques, see personal loans without salary transfer.

When it can be presented

A lender can present a security cheque on or after the date written on it, never before (Article 648(1)). If the account is short on that date, partial payment and direct enforcement apply as for any cheque.

You cannot stop it by disputing the debt. Under Article 651, a bank accepts an objection to paying a cheque only if it was lost or its holder went bankrupt; the Central Bank’s Q&A also covers a cheque stolen, obtained by fraud or destroyed. Otherwise the bank must pay, and a court may not suspend payment even if the debt is disputed. If you disagree with what a lender claims, raise it in writing and, if needed, complain to the bank and Sanadak.

Getting your cheques back

When a loan is paid off early, the lender must return the remaining cheques within a set time.

Return of post-dated cheques after early payoff

7 business days

When a loan or financing is paid off early, the institution must return the remaining post-dated cheques to the consumer within 7 complete business days of the payoff.

The clause does not name credit cards. For a card, ask for the cheque in writing when you close it; see closing a card and getting your cheque back. For loans, see settling a personal loan early, and use the early settlement calculator to estimate the capped fee.

If you received a cheque that bounced

As the holder, you decide whether to take a partial payment, then keep the paperwork and take the cheque to the execution court for the rest.

Time to present a cheque

6 months

A cheque payable in the UAE must be presented for payment within 6 months of the date written on it as its issue date, although the bank may still pay it after that period.

1. Present it on time. Present the cheque on or after its date and within 6 months of it. The bank may still pay a late cheque, but do not rely on that.
2. Decide on partial payment. Accept what the account holds, or refuse it and claim the full amount.
3. Keep the original cheque and the certificate. The Central Bank’s Q&A says the certificate proves your rights before the courts.
4. Collect the rest. Present the cheque again later, or apply to the execution judge to enforce the unpaid amount.
5. Report a crime only where it fits. A criminal complaint fits only the acts that remain crimes, listed above. Under Article 682 it does not stop you enforcing the cheque or claiming compensation.

Bounced cheques and travel bans

In a cheque debt, a travel ban is not automatic. It comes through the courts: the holder can include a travel ban request in the enforcement file, and the judge decides under the Civil Procedure Law of 2022.

Debt threshold for a travel ban

AED 10,000

A creditor can ask the competent judge to ban a debtor from travelling, even before filing the main claim, only where there are serious reasons to fear the debtor will flee and the debt is at least AED 10,000, unless the claim is for established maintenance, an obligation to do or not do something, or wages for work.

How bans are requested, checked and lifted is covered in our guide to travel bans for debt.