Guide · updated 08.09.2026 · 12 min read · Lucent Legal team

Article 150 of the UAE Banking Law: When a Bank's Loan Claim Is Inadmissible

Borrowers in default assume the bank always gets to sue. If a UAE bank lent to an individual without adequate security, the court will not hear its claim.

Short answer

• The rule is Article 150 of Federal Decree-Law 6/2025 on the Central Bank, in force since 16 September 2025. It previously sat in Article 121 bis, introduced by Law 23/2022 from January 2023.
• The wording: a bank must obtain and maintain adequate guarantees for credit given to an individual, proportionate to that person's income. If it did not, then a claim, lawsuit or plea by that bank is inadmissible before the courts and before arbitral tribunals.
• This is not an argument raised at the end of a trial. It goes to whether the bank can bring the case at all.
• The Abu Dhabi Court of Cassation drew the line on 28 August 2025. A salary certificate, credit life insurance and one security cheque for the full amount are adequate. Exceeding the 20-salary lending cap does not by itself sink the claim.
• Recovery is confined to the security the bank actually accepted.
• Separately, Article 148(11) of the same law bans charging interest on accrued interest for consumer facilities. With no rate agreed, the cap is 9% a year.
• The transition period under Law 6/2025 ends on 16 September 2026.

If proceedings have started, the sequence is here: what to do when a UAE bank sues you.

What Article 150 requires

The provision has two limbs, both favouring the borrower.

The first limb is an obligation. Licensed financial institutions must obtain and maintain adequate guarantees for all facilities provided to natural persons and sole proprietorships. Adequacy is measured against the customer's income, any existing guarantee, and the size of the facility. The Central Bank sets the parameters.

The second limb is the sanction. A claim, lawsuit or plea by that institution over credit extended to an individual is not admissible before the courts or arbitral tribunals where it failed to obtain or maintain those guarantees. The Central Bank may also impose administrative and financial penalties for the same failure.

The word "maintain" carries as much weight as "obtain". Security taken at drawdown and later allowed to lapse creates the same problem. A returned cheque, a lapsed policy, a guarantee released without replacement: each is a gap worth checking in the credit file.

What UAE courts count as adequate security

The Abu Dhabi Court of Cassation ruled on this on 28 August 2025 and set a usable benchmark.

The court accepted a package of three elements:

1. a salary certificate evidencing income;
2. credit-related insurance;
3. one deferred cheque for the full amount of the facility.

The lower court had dismissed the bank's claim because the loan exceeded twenty times the borrower's salary. The Cassation Court reversed. Its reasoning: the 20-salary cap is a prudential requirement imposed on the bank by the regulator. Breaching it exposes the bank to administrative consequences. It does not release the borrower, and it does not make the claim inadmissible where adequate security exists. The test turns on recognised security, not income multiples.

The other half of the judgment matters more. Enforcement is confined to the security the bank accepted, under CBUAE Circular 9/2022 as supplemented by Circular 3/2023. A bank holding a cheque for part of the balance is limited to that part. The court treated Regulation 29/2011 as the reference point for the retail context, including post-dated cheques covering up to 120% of the loan.

Where the rule came from

The timeline is short:

• January 2023. Law 23/2022 inserts Article 121 bis into the 2018 Central Bank Law.
• 16 September 2025. Law 6/2025 repeals the 2018 law entirely. The rule moves to Article 150 without a change of substance.
• 16 September 2026. The transition period for compliance with the new law expires.

References to Article 121 bis in older judgments still work. It is the same rule under a different number. The wider set of changes: new UAE laws in 2026.

Compound interest and the rate cap

Article 148(11) of Law 6/2025 prohibits a licensed institution from charging interest on interest already accrued on consumer facilities. Article 88 of the Commercial Transactions Law 50/2022 backs the same prohibition and bars a creditor from claiming compound interest as supplementary compensation.

Where the contract fixes no rate, Article 73 of Law 50/2022 caps interest at 9% a year until full settlement. Islamic institutions face a stricter rule under Article 473, which bars charges on delayed debt including late-payment fees framed as compensation.

The amount claimed is separate from the bank's right to claim at all. A consumer loan calculated on compound interest needs recalculating even where the claim itself is admissible.

What the bank had to do before suing

The CBUAE Consumer Protection Standards are binding and give a second layer of defence. They require the bank to:

• contact you on the 30th calendar day of arrears and establish why the arrears arose;
• issue a written notice after 60 days setting out the date arrears began, the number and value of missed payments, the balance, the rate, any fees, the contact details of the responsible officer or collection agent, and the consequences of continued non-payment;
• send an updated arrears notice monthly thereafter, showing how payments were allocated;
• provide qualified credit counselling and give reasonable consideration to alternative arrangements when you approach them;
• document the reason for refusing your proposal internally and give it to you in writing;
• disclose any agreed revised schedule in writing within 10 full business days, split between principal and interest.

Restructuring beyond 48 months is permitted where total obligations exceed 50% of income, provided no new money is advanced. Regulation 29/2011 also lets a bank defer up to two instalments a year at its discretion.

The duty to consider is not a duty to agree. A skipped procedure is still a documented breach, useful in the proceedings and in a complaint.

Collection conduct

The same Standards limit how the debt can be pursued. Permitted channels are email, registered mail, courier, SMS and telephone. Prohibited:

• visiting your home or workplace without your express consent or a court order;
• contacting you outside 09:00 to 20:00;
• disclosing your information to third parties beyond the credit bureau and an authorised agent;
• making an unreasonable or excessive number of call attempts.

Every contact must identify the bank, the department, the working hours and the officer. Records are kept for five years after settlement or write-off. If the bank appoints a third party, it must name them, the amount and the scope of their authority. Full breakdown: what UAE debt collectors cannot do.

The 2026 Telemarketing Regulation and its 09:00 to 18:00 window govern marketing calls, not collection.

Complaints go to the bank first. With no written answer within 15 calendar days, or an answer you reject, the matter goes to Sanadak, the financial ombudsman: how to complain about a UAE bank.

Guarantors under the new Civil Code

Federal Decree-Law 25/2025 replaced the 1985 Civil Code and came into force on 1 June 2026.

Law-firm commentary points to two provisions that change the guarantor's position. A creditor must proceed against the principal debtor first, and may not execute against the guarantor's property before the debtor's assets are exhausted, unless the guarantor is jointly and severally liable or the contract says otherwise. Separately, the guarantee is said to lapse where the creditor does not sue within six months of the day after the debt fell due.

Both readings come from firm analysis rather than a verified copy of the official text. The six-month point is a strong claim. Check the article against the official version before relying on it.

What did not change

Limits presented online as new 2025 or 2026 rules have been in force since 2011:

The claim that the Central Bank abolished the minimum salary for consumer loans has circulated since November 2025. No circular supports it, and Regulation 29/2011 never set a minimum salary for consumer loans. The broader picture is here: is there a new law for loan defaulters in the UAE in 2026.

When the defence actually works

Three situations where Article 150 is worth raising:

1. The loan was granted without income documents. No salary certificate, no cheque, no insurance. The bank lent on trust.
2. Security existed and then disappeared. The cheque was returned, the policy lapsed, the guarantee was released.
3. The claim is calculated on compound interest. This does not defeat the claim, but it changes the sum.

The point is raised by the defendant during proceedings and needs work on the credit file. The judge does not raise it independently.

If the problem is wider than one claim, there is a formal route: personal insolvency in the UAE. Filing is mandatory at AED 250,000 of debt, and creditors can petition at AED 1,000,000.

This material is for information only and is not legal advice. UAE law changes — a lawyer will assess how it applies to your situation.