Bank Ordered to Refund $21,870 in Undue Interest Charges on Personal Loan

An Abu Dhabi commercial court ordered a bank to repay 80,596 dirhams to a customer after finding the institution collected excessive interest on a loan. The court also imposed a 3% annual penalty interest rate, marking another case where UAE courts are scrutinizing banking practices and protecting consumer rights.

The customer filed the lawsuit after discovering through an expert advisory report that the bank had overcharged him on his loan payments. He originally sought the 80,596 dirhams plus an additional 20,000 dirhams in material and moral compensation, along with legal interest from the filing date until full payment.

Here's what the expert report found: After examining all debt elements and settling accounts between both parties regarding the loan, the customer had paid 80,596 dirhams more than what he actually owed. The bank's representative appeared in court but only requested a postponement to respond and never provided a substantial defense.

The court accepted the expert's findings completely. Judges said they trusted the report because it came from a qualified expert who followed proper banking practices and stayed within his assigned scope of work. The bank failed to challenge the claims or provide credible evidence to dispute what it owed.

But the court drew the line at additional compensation. The customer's request for 20,000 dirhams in damages was rejected because he couldn't prove the bank acted with fraud or gross negligence. Under UAE commercial law, customers can only claim supplementary compensation beyond delay interest if they show the creditor caused damage through deliberate misconduct or serious errors.

This ruling reflects how UAE courts are becoming more protective of banking customers while maintaining balanced legal standards. Banks operating in the Emirates now face closer scrutiny of their lending practices, especially regarding interest calculations and fee structures.

The case also shows the importance of expert financial analysis in banking disputes. The court's decision relied heavily on the independent expert's report, which became the foundation for determining exactly how much the customer overpaid.

For the banking sector, this sends a clear message about accuracy in loan calculations and the potential costs of overcharging customers. The 3% annual penalty interest means banks can't simply return excess payments without consequences - they must compensate customers for the time they held money that wasn't rightfully theirs.