The UAE Central Bank has put an end to widespread speculation on imminent plans to set a ceiling on credit card interest rates, saying there is no such plan on the grounds these cards carry big risks to banks.
Central Bank chairman Khalil Fouladhi said the Board of Directors decided not to impose any limit on credit card rates following a meeting with the country’s 23 national banks and 28 foreign units to discuss credit card fees.
He said a study conducted by the Central Bank on credit card interest rates also showed there was no need for imposing a ceiling although rates in the UAE are the highest in the region as they stand at 36 per cent against 24 per cent in the other members of the six-nation Gulf Cooperation Council (GCC).
“Frankly speaking, the Central Bank has no plans to issue any new legislation on credit cards following our meeting with banks…we found that these banks shoulder a big risk in loans to credit cards,” he told local newspapers.
“We have carried out a study and found that rates on credit cards in the UAE are the highest in the region…but the Central Bank has taken into consideration the country’s demographic structure, which is different from many other countries…this structure increases risks to banks.”
Fouladhi’s comments contradict recent remarks by the Central Bank that it was working on new regulations to set interest rates and fees for the first time in the country following growing public complaints about random charges by banks.
A senior official said recently that the Central Bank had been in touch with all banks in the UAE to obtain information about rates and fees imposed by them on credit card holders, adding that this would help formulate the new rules.
He said information obtained by the Central Bank from the UAE’s 51 banks was a “surprise”, in an apparent reference to the high rates and many types of fees imposed by banks on credit card clients.
“We are studying a new comprehensive system that will regulate the credit card market and it will be binding to all banks,” head of the treasury at the Central Bank, Saif Al Shamsi, told Emirat Alyoum Arabic language daily in January.
“All options are under consideration…they could include setting a ceiling on fees and interest rates on credit cards or fixing definite fees and rates.”