Are you aware of the new Central Bank cap on banking fees in the UAE? If not then here’s what you need to know.
Recently, the Central Bank announced a new law wherein banks need to get a prior approval to increase any service fee by more than 5 percent.
Central Bank Amendment
The Central Bank has put forth a new law to regulate the fees or commissions charged on retail bank services. This includes home loans, and late fees for credit cards. The change was implemented as part of CBUAE’s role in active supervision of the banking sector along with a greater focus on consumer protection.
The main purpose of the fee cap is to protect consumers from anti-competitive and unfair practices. This also includes checking that financial companies don’t use maximum caps when the actual costs are lower. Banks will have to justify the increased cost in order to increase fees.
All consumers are advised to notify the Central Bank of any non-compliance incidents. CBUAE has instructed banks and finance companies to display the new fee caps on their respective websites. They will also need to state and seek approval from the Central Bank of any changes to the fees above 5 percent. The approvals need to be done during the first 5 days of April or October each year.
In the future, to ensure consumer protection banks will need to have all product approval processes in place. The onus is on the banks to adopt fair practices when charging fees and to avoid the default use of maximum caps.