ARTICLE
24 April 2025

Does The Bank Have A Right To Close A Customer's Account As A Result Of Multiple Bounced Cheques?

AM
Dr Hassan Elhais

Contributor

Dr. Elhais, with his vast legal expertise spanning family, arbitration, banking, commercial, company, criminal, inheritance, labour, and maritime law, is dedicated to providing top-tier legal solutions. As an integral member of the team at Awatif Mohammad Shoqi Advocates & Legal Consultancy in Dubai, he contributes to the firm's mission of delivering comprehensive legal counsel across the UAE. The team, as a whole, is committed to maintaining the highest levels of integrity, confidentiality, and discretion. Initially making his mark in criminal and public law, Dr. Hassan made the decision to move to Dubai in 2006, marking a significant step in his legal career. Since joining Awatif Mohammad Shoqi Advocates & Legal Consultancy, he has been an active contributor to the firm's growth and reputation. Dr. Hassan is known for his dedication to transparency in legal dealings and fee structures, a reflection of his solid ethical values.
In the UAE, it is legally permissible for banks to close a customer's account if multiple checks are returned due to insufficient funds.
United Arab Emirates Finance and Banking

Introduction:

In the UAE, it is legally permissible for banks to close a customer's account if multiple checks are returned due to insufficient funds. All the banks and financial institutions in the UAE are regulated by the Central Bank of the UAE.

The central bank of the UAE issued a circular for the UAE Central Bank's Consumer Protection Regulation (circular no. 8/2020) for all the banks in the UAE. According to this circular, the banks are obligated to inform customers in writing about the consequences of returned cheques. It stipulates the responsibility of all the banks to inform customers in writing about the consequences of returned cheques. These consequences include applicable fees, potential closure of the current account, and negative reporting to the Al Etihad Credit Bureau.

Furthermore, the central bank has stipulated that a customer's account may be cancelled for two years if four cheques are returned within a year due to insufficient funds. If this happens again, the cancellation period is extended to three years, and any unused cheques must be recovered.

In the event that if customer's account has been cancelled by the bank due to bounced cheques, the bank will be reported to the Al Etihad Credit Bureau. The customer's credit score might decline as a result of this report. Moreover, this poor credit score could make it more difficult for them to get cheque books or open new accounts from other banks. According to central bank regulations, all financial institutions must investigate creditworthiness before providing such services.

What are the suggested courses of action?

If anyone has concerns that their bank account would be closed as a result of bounced cheques, they should first review the terms and conditions of their bank regarding cheque returns. Further individual can contact their bank's customer service or relationship manager to understand specific policies. It is important to ensure sufficient funds are maintained in their account to cover issued cheques.

Conclusion:

It is possible for the customers to take preventative steps, and it will assist in protecting the individual's credibility and maintaining a favourable standing with the bank.

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