Tuesday, April 25, 2006

Bouncing Czechs

Not the famed acrobatic Serbo-Croats of yore, not even the eponymous band of the eighties, no, I'm talking about a uniquely Khaleeji concept: the idea that a cheque drawn on a bank is somehow like cash. And that if the cheque is dishonoured, the issuer has committed a criminal offence. Note that well. It's not a simple civil offence, it's criminal. Yes folks it's true, you can go to jail for having a cheque bounce on you.

I have no sympathy for the scoundrels who issue post-dated cheques for large amounts of money, nor for the victims who accept these things and release goods or services against them. Both parties deserve everything they get.

But for us mere mortals, things are a bit different. Let's say you want to buy a car, and you want to pay over 36 months. You have to write 36 post-dated cheques! Or you are renting a house or apartment. You will have to write three or four post-dated cheques for the year's rent. How on earth are you supposed to be able to guarantee that you can honour these cheques? Unless you have a ton of money stashed away under your bed in Switzerland, you cannot. You have no way of knowing if you will still have a job / source of income next week, never mind three years from now. But the law here, stupidly, takes the view that you, by signing a post-dated cheque, have promised that you will have funds in place at the time that the cheque is presented!

So if you have been given a PDC and it bounces, you can take the cheque to the Police, and they will happily arrest and incarcerate the issuer. I wonder how that is supposed to solve anything?

Some of the smarter companies here will delay presenting a PDC for a few weeks if you ask them to, but you have to pay them a fee (I know, I've done it twice with my landlord - 500 dirhams a go it is).

I bring this up because of an article in Gulf News a few days ago. A lawyer is whingeing that banks are being lax in reporting bounced cheques to the UAE Central Bank. The banks are supposed to report all bounced cheques because the UAECB has a rule that says anyone who has four bounced cheques in a year can no longer have a cheque book.

Post-dated cheques are a seriously bad idea. Basing large chunks of your economy on them is silly. Making it a criminal offence for anyone to issue a bouncy cheque is just plain moronic. I hate having to write PDCs, it makes me feel dirty. Basically when I issue a PDC I'm telling a lie, because there is no way that I can know that I will have funds in place to cover it on the due date. Insh'allah I will, but you never know. I could be sick and unable to work, I could have clients (especially Government) who do not pay on time, I could actually have no work at all.

But for many transactions in the UAE - buying a car on credit, renting accommodation - the only way you can do it is by issuing PDCs. Ridiculous.