A UAE bank may take post-dated cheques covering your instalments, but their total value may not exceed 120% of the loan, and a signed blank cheque is prohibited outright. Clause 7.1.1.8 of the Central Bank’s Consumer Protection Standards also requires the bank to hand you stamped photocopies of every cheque it holds, and to return the remaining cheques within 7 complete business days once the loan is paid off early.

Most borrowers hand over the cheques without reading anything and never see a copy. That single omission is what makes the rest of the relationship hard to police, because you cannot prove what the bank holds.

This guide covers what a bank can and cannot demand as security, what it must assess before lending, the capped fees on early settlement, and the letters you can compel it to issue. If a cheque has already bounced, the criminal and civil consequences are a separate subject covered in the UAE bounced cheque law after the 2022 rewrite.

The 120% Rule and the Blank Cheque Ban

Clause 7.1.1.8 sets three limits in one paragraph. The bank must “only take from the Consumer the number of post-dated cheques covering the instalments and of value not exceeding 120% of value of the loan/financing or the debit balance,” it is “prohibited to take signed blank cheques,” and where cheques are provided the bank must give you stamped photocopies “as proof of possession.”

The 120% ceiling is the part borrowers rarely check. On a AED 500,000 facility the total face value of every cheque the bank holds may not exceed AED 600,000, however many cheques that is.

The blank cheque prohibition is absolute rather than conditional. A cheque handed over signed but with the amount left open is not permitted security, regardless of what the facility agreement says or what you were told at signing. The other security a lender takes over your account is the direct debit mandate, covered in how a Direct Debit Authority works in the UAE.

Why the Stamped Copy Matters More Than It Sounds

A cheque you cannot describe is a cheque you cannot dispute. The stamped photocopy fixes the amount, the date and the number of cheques at the moment you hand them over, which is the only reliable record of what the bank is holding against you.

It also gives you something concrete when the loan ends. Without a list you are asking for the return of documents you cannot enumerate, and clause 7.1.1.8 puts the obligation on the bank to have created that list for you in the first place.

Getting Your Cheques Back

Clause 7.1.1.8 closes with a hard deadline: when the lending is paid off early, “the remaining postdated cheques must be returned to the Consumer within 7 complete business days of the loan/financing being paid off.”

Note what that clause covers and what it does not. It is written around early payoff, so where a facility simply runs to term, ask for the return of any unused cheques in writing and treat the same seven-day standard as the reasonable benchmark.

What the Bank Must Do Before It Lends

Lending is not simply a credit decision the bank makes privately. Clause 7.1.1.3 requires it to assess your ability to meet credit obligations and to comply with the Debt Burden Ratio limits prescribed by the Central Bank, and clause 7.1.4.6 requires the completed affordability assessment to be dated and signed by both you and the bank’s credit staff, with a copy given to you.

That copy is a right, not a courtesy. If you were never given one, the assessment that justified the lending is not something you can check.

Clause 7.1.1.5 then lists five things the bank must explain before granting any credit product, in plain language. They cover the application process, the offer and Key Facts Statement, the risks including rate variation and early settlement fees, the implications of pledging collateral or post-dated cheques, and the consequences of late payment.

Guarantors Are Owed the Same Explanation

Clause 7.1.1.5(d) is explicit that the bank must explain “to Consumers and guarantors” the implications of pledging any collateral, post-dated payment cheques or other guarantees required to obtain the loan. A guarantor who was handed a signature page without that explanation did not get what the Standards require.

What a guarantor is actually exposed to afterwards is a separate and much larger question, set out in what a loan guarantor in the UAE is liable for.

Deferrals Cannot Break the Ratio

Clause 7.1.1.7 permits a bank to defer instalments as it sees fit, “provided that such deferments do not result in the amount of future deductions from salary being in excess of the DBR percentage as prescribed by the Central Bank.” A payment holiday that pushes your future deductions past the ratio is not available even if both sides want it.

That is worth knowing before you ask. It explains refusals that otherwise look arbitrary, and it points to restructuring the tenor rather than skipping payments.

Early Settlement: The Capped Fees

The Standards carry an annexure of maximum fees, and the credit-related caps are the ones borrowers most often overpay. The figures below are the Central Bank’s published ceilings, not typical market prices.

Product Fee Cap
Consumer loan or financing Early settlement from another bank’s loan 1%, maximum AED 10,000
Consumer loan or financing Final settlement from other sources or end-of-service benefits 1%, maximum AED 10,000
Consumer loan or financing Partial payment 1%, maximum AED 10,000
Consumer loan or financing Delayed payment penal interest Maximum AED 200
Consumer loan or financing Loan cancellation fee AED 100
Car loan or financing Early settlement 1% of outstanding
Car loan or financing NOC to the Traffic Department Zero
Car loan or financing Late payment penal charges Maximum AED 500
Home loan or financing Early settlement Maximum 1% of outstanding balance or AED 10,000, whichever is less
Home loan or financing Partial settlement charges Maximum 1% of outstanding balance or AED 10,000, whichever is less
Home loan or financing Late payment fees Maximum AED 700
Home loan or financing Issuance of NOC AED 150
Personal account No liability certificate AED 60

The car loan line is the one to check on a sale. A zero-cost NOC to the Traffic Department is a published cap, so a charge for that document is not a fee the Standards contemplate.

The Interest You Should Not Be Charged

Clause 7.1.5.12 does more work than the fee caps. Banks “are not permitted to charge interest/profit on accrued interest/profit,” and they “are not permitted to charge future unearned interest from the date of full early settlement of the credit facility.”

On a partial early settlement the same clause requires the interest to be “proportionately adjusted based on the principal remaining.” A settlement quote that still carries the full original interest to term is not consistent with that rule.

Clause 7.1.5.13 adds the calculation basis: the APR on loans, financing, overdrafts and unpaid credit card balances must be calculated using the reducing balance method. That is the provision behind the flat-rate versus reducing-rate gap that makes advertised rates look better than they are, and the comparison is worked through in the guide to personal loans in the UAE.

Moving Your Loan to Another Bank

Clause 5.1.3.3 requires banks, “without undue delay,” to allow consumers to transfer their loan or financing from any bank or finance company operating in the UAE. The existing bank may charge an early settlement fee as prescribed by the Central Bank, which is the 1% and AED 10,000 ceiling above.

Refusal is therefore not the bank’s decision to make. Delay is the more common obstacle, and the wording of the clause is what you cite when the liability letter takes weeks.

The Letters You Can Demand

Clause 7.1.1.9 gives you a right to written confirmation at any time of whether liabilities are owing. Where nothing is owed the bank must issue a “letter of no liability,” and where something is owed it must instead issue a “letter of liability” stating the details and amounts, in either case “within 7 complete business days from the date of the Consumer’s request.”

Those two letters are what a buyout, a car sale, a property transfer and a final departure all run on. The annexure caps the no-liability certificate on a personal account at AED 60, so a large “processing” charge for it is worth questioning.

If you are leaving the country, the sequence matters as much as the letters, and it is set out in closing a UAE bank account before you leave.

Islamic Finance Is Treated Differently on Early Settlement

Clause 11.1.2.3 restricts Islamic financial institutions to imposing early settlement fees “except in relation to the actual costs incurred” as a result of the early settlement process, in accordance with the Higher Shari’ah Authority resolution on early settlement No. 76/3/2019.

That is a different test from a percentage cap. A conventional bank can charge up to 1%, while an Islamic institution is limited to its actual cost, which may be less.

Clause 11.1.2.2 adds that where the Central Bank mandates a partial waiver of the outstanding debt on early settlement, the institution must comply with the permissible retention limits set under the relevant Shari’ah authority resolutions. The practical differences between the two models are compared in Islamic home finance versus a conventional mortgage.

What to Do Before You Hand Over Cheques

Five checks take about ten minutes and are the difference between a documented position and an undocumented one.

  • Count the cheques and add up their face value. The total may not exceed 120% of the facility, and the number should correspond to the instalments rather than exceed them.
  • Refuse any cheque you are asked to sign with the amount blank. Clause 7.1.1.8 prohibits the bank from taking one, so this is not a negotiation.
  • Ask for the stamped photocopies before you leave. The obligation to provide them is the bank’s, and the copies must be stamped as accepted.
  • Ask for your signed copy of the affordability assessment. Clause 7.1.4.6 requires it to be dated, signed by both sides and given to you.
  • Get the early settlement example in writing. Clause 2.1.3.8 requires the Key Facts Statement on a financing product to set out a worked example of the early settlement fees.

Where a bank refuses any of these, the escalation route runs bank first and then the ombudsman. The complaint path and its deadlines are covered alongside the card dispute process in the chargeback and Central Bank dispute guide.

What the Standards Do Not Settle

The Consumer Protection Standards repeatedly require compliance with the Debt Burden Ratio “prescribed by the Central Bank” without stating the percentage inside the Standards themselves. The ratio therefore sits in a separate instrument, and we could not retrieve a current published figure while writing, so no percentage is asserted here.

The Standards also leave the return of cheques on a loan that runs to full term unaddressed, since clause 7.1.1.8 is drafted around early payoff. And they do not state what happens when a bank has taken cheques exceeding the 120% ceiling, beyond the fact that doing so breaches the Standards.

Frequently Asked Questions

Can a UAE bank ask for a blank signed cheque?

No. Clause 7.1.1.8 of the Central Bank’s Consumer Protection Standards states plainly that it is prohibited to take signed blank cheques. The prohibition is unconditional and does not depend on what the facility agreement says.

How many security cheques can a bank take for a loan?

Only the number covering the instalments, and of a total value not exceeding 120% of the loan, financing or debit balance. Both limits sit in clause 7.1.1.8, so the count and the total face value each have to be checked.

Does the bank have to give me copies of my cheques?

Yes. Where cheques are provided, the bank must give you a photocopy of all the properly completed cheques, stamped as accepted, as proof of possession. That stamped copy is your only reliable record of what the bank holds.

When do I get my security cheques back?

Within 7 complete business days of the loan or financing being paid off early, under clause 7.1.1.8. The clause is written around early payoff, so on a facility that runs to term request the return in writing and use the same seven-day standard as your benchmark.

What is the maximum early settlement fee in the UAE?

For consumer loans the annexure to the Standards caps early settlement, final settlement from other sources and partial payment at 1% with a maximum of AED 10,000. Home finance is capped at 1% of the outstanding balance or AED 10,000, whichever is less, and car finance at 1% of outstanding.

Can the bank charge me interest for the years after I settle early?

No. Clause 7.1.5.12 prohibits charging future unearned interest from the date of full early settlement, and on a partial settlement requires the interest to be proportionately adjusted based on the principal remaining.

Can my bank stop me moving my loan to another bank?

No. Clause 5.1.3.3 requires banks to allow consumers, without undue delay, to transfer their loan or financing from any bank or finance company operating in the UAE. The existing bank may charge the capped early settlement fee, but it cannot refuse the transfer.

How long does a liability letter take?

Within 7 complete business days from the date of your request, under clause 7.1.1.9. The bank must issue a letter of no liability where nothing is owed, or a letter of liability stating the details and amounts where something is.

Do guarantors have to be told what they are signing?

Yes. Clause 7.1.1.5(d) requires the bank to explain the implications of pledging collateral, post-dated payment cheques or other guarantees to consumers and guarantors alike, before the credit product is granted.

Is an Islamic bank’s early settlement fee the same?

No, it is limited differently. Clause 11.1.2.3 restricts Islamic financial institutions to fees relating to the actual costs incurred as a result of the early settlement process, in line with Higher Shari’ah Authority resolution No. 76/3/2019, rather than to a flat percentage ceiling.

Official Sources

Information current as of August 2026. Verify with official authorities and with your own facility agreement before proceeding.

This guide is for informational purposes only and is not financial or legal advice. UAE regulations and fees are subject to change. Always verify current requirements with the relevant official authority before proceeding with any application or transaction.