In a decision by its Sharia Board directed to Islamic banks

"Central": It is not permissible to collect fees for late payment of installments without informing the customer

The Sharia Supreme Council of the Central: The amount paid as a commitment to donate is spent in full in the account of good deeds.

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The Sharia Supreme Authority, affiliated to the Central Bank, affirmed that Islamic banks and financial institutions are not permitted to collect fees for late payment of installments, except after requiring the client to pay the debt owed on him and notifying him that if he does not pay it, he will be subject to deduction.

In a decision, she explained that the sums collected as fees for late payment, which are directed towards donations, must be included in the terms of the contract under which the debt arose, stressing that this decision will come into force, starting from the first of 2021.

It is noteworthy that the sums collected by Islamic banks and financial institutions, as fees for late payment of installments, are not included in the profits of these entities, or are used to reduce costs, but rather are directed to donations, charity or charitable work, in accordance with the provisions of Islamic Sharia, and what is applicable. Since years.

The Authority's Message

In detail, the Supreme Sharia Board of the Central Bank said, in a letter to financial institutions and Islamic banks, that Emirates Today obtained a copy of, that it had seen data on follow-up and collection costs in licensed financial institutions that carry out all or part of their business and activities, according to The provisions of Islamic law, in addition to the practices related to the obligation to donate, in consideration of late payment, as well as the deductions that some Islamic financial institutions may take from the sums collected as a donation.

Non-permissibility

She explained that, accordingly, it has issued its decision that it is not permissible to oblige the customer to increase the amount of the debt owed, to pay it as a donation, if it is not stipulated in the contract under which the debt arose.

It is also not permissible to collect the amount of the commitment to donate, except after asking the customer to pay the debt owed on him, and notifying him that if he does not pay it, that amount will be deducted from it.

According to the authority’s decision, “the collection of the amount of the commitment to donate (the delay fee) must be adhered to in the presence of procrastination on the part of the client (the debtor), by eliminating his insolvency,” explaining that “it is possible to stipulate in the contract that the late customer is considered procrastinating, unless he is proven The opposite of that ».

The Sharia Supreme Council stressed that “the Islamic financial institution does not exempt the customer from the amount of the commitment to donate, after fulfilling his obligation to pay, if it is not stipulated in the contract that his commitment to donate depends on the institution’s request to him.”

Account of good deeds

Likewise, the Foundation may not deduct anything from the amount paid, by way of an obligation to donate, to cover the actual direct costs of collection. Rather, the whole amount must be spent in the calculation of good things, and this is not stipulated in the contract that the amount of the commitment to donate is spent on charities, after deducting the costs. The direct actual costs of collection, and the duty to be calculated under the supervision of the internal Sharia Supervisory Committee, and the first to state in the contract the claim of the direct costs of collection in a separate clause other than the obligation to donate.

The Authority affirmed that Islamic financial institutions must adhere to this decision, starting from 2021.

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It is not permissible to compel the customer to increase the amount of the debt owed, which he pays 

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