The UAE Central Bank has announced new caps on the banking fees that lenders can charge customers in the country.
The new maximum limits or ‘fee caps’ have been set on fees or commissions charged on retail customer services such as home loans and late fees for credit cards, a statement said.
The caps have been introduced as part of an amendment to ‘Annexure 2’ of the Regulations Regarding Bank Loans and Services Offered to Individual Customers (2011).
All the fees highlighted in the amendment are exclusive of the 5 per cent VAT charges set by the Federal Tax Authority.
The central bank has instructed banks and finance companies to display the new fee caps on their websites.
The financial institutions must also have the appropriate product approval processes in place for all the products, and if applicable, charge lower fees than those prescribed in the caps.
The cap levels have been calibrated based on a “detailed benchmarking exercise, understanding of cost bases and expert judgment by the central bank”, the statement said.
The analysis benchmarked 140 fee types and applied fee caps on 43 of them. Of the 43, 24 are either at the same level or lower than the old fee caps and 19 are new fee types such as those that relate to home loans and credit cards.
Banks were engaged in an initial round of consultations about the revised regulation on fee caps and are “comfortable with the extensive benchmarking and transparent nature of the new fee cap mechanism”, the statement added.
The fee caps will help to “protect consumers from anti-competitive and unfair practices”, the central bank said.
“This includes ensuring that entities do not automatically default to using the maximum caps when the actual costs are lower and banks will have to justify their increased costs in order to increase fees,” it explained.
Consumers have been urged to notify the central bank if they come across any incidents of non-compliance.
Looking ahead, fees charged by the banks will be reviewed annually.
The amendment also states that banks will need to notify and seek approval from the central bank of any planned introduction of a new fee or a change of fees larger than 5 per cent. This can be done during the first five days of April or October each year.
The central bank said is it undertaking more “active supervision of the banking sector with the adoption of consumer protection principles – competition inhibiting, usury, notary function, and strategic related principles”.