The Debt Panel: 'How can I get a court case removed from a credit report?'

A Dubai company was taken to court by a supplier over a $51,735 debt and the disputed amount remains on AECB's records despite it being paid off

Nick Donaldson / Getty

During the Covid-19 pandemic, our business was affected very badly and our company had a conflict with one of our suppliers as we owed them Dh190,000 ($51,735). We agreed in writing to a payment plan that would clear the outstanding amount owing in six months.

However, the supplier filed a legal case against us for Dh400,000, which included purchase orders that had been cancelled in writing as the supplier failed to deliver them to us.

In the end, the court ordered that we pay the Dh190,000 and the court costs in six months. We paid this promptly and cleared our dues in 2021.

This month, when we approached a local bank for working capital, our Al Etihad Credit Bureau report reflected the court case. We have explained the situation to the bank and they are fine with it.

However, since we have cleared this amount, shouldn't it be removed from AECB's credit report? If not, how long will the court case be shown on our AECB report and what can we do to get it removed? DB, Dubai

Debt panellist 1: Jaya Ratnani, managing partner at Freed Financial Services

The Covid-19 pandemic caused a lot of financial disturbance to the livelihoods of many businesses and individuals.

Banks helped borrowers by waiving any late payment fees, reducing interest rates and providing payment holidays to individuals as well as businesses during this period.

These facilities were provided to businesses that could prove their financial instability.

Al Etihad Credit Bureau's report is a document that includes your personal identity information, details of your credit cards, loans and other credit facilities availed with all banks in the UAE, in addition to other sources such as telecom companies and utilities.

AECB reports also highlight your payment, default and bounced cheque history.

Under federal law, the information in your credit report is provided by all financial institutions, which send updates to AECB every month.

Banks and other financial institutions evaluate the credit rating of an individual or company when reviewing an application for a loan, credit card or other credit facilities.

If an AECB report shows any defaults and late payments, it will affect the overall score, which causes difficulties for future credit from financial institutions.

Defaults are reflected on AECB reports for a minimum of six months to one year, subject to the banks reporting to the credit bureau.

In your situation, the payment has been cleared and your case is closed. You can provide your clearance certificate from the bank to AECB, and they will rectify your report within 24 to 48 hours.

During this period, if you need to avail a loan urgently, you can explain your situation to the bank and seek its approval for credit.

Debt panellist 2: Vijay Valecha, chief investment officer at Century Financial

While the complete details of the case are not available, what is critical are the technicalities of the case. The company mentioned that the supplier filed a lawsuit for Dh400,000 but, as per the court ruling, they finally paid an amount of Dh190,000.

Generally, AECB doesn't get involved in court cases between a supplier and customer as they are considered to be civil cases.

However, there are two possible scenarios that could have resulted in the civil case against the company, which led to the default on their credit report.

First, if the credit rating of the company has been affected, it could mean that it involved a working capital facility such as a letter of credit, which could have been provided by a bank or credit provider.

From a banking perspective, the amount concerned could have been around Dh400,000. It does not matter to the bank if the purchase orders are cancelled or not because, in their records, the amount has not been paid.

While Dh190,000 was paid, if the amount owed was Dh400,000, then from a financial perspective, it means that restructuring has taken place and the loan is “settled”.

However, for practical purposes, the amount has only been partially paid. Or, in other words, technically, it will be considered a default and the bank would have reported the matter to AECB.

In the second scenario, court orders and judgments are also part of determining a credit score — courts in Ras Al Khaimah and Dubai, for instance, provide information to AECB — and this seems more likely to be the case here.

Suffice to say, all financial sector-related defaults in the UAE are linked to the defaulter's name and ID document. This means that it is automatically included in the records kept by AECB. As a result, missed payments can appear in the credit report for a period of up to five years.

Nevertheless, if there is any inaccuracy in the credit report, a data correction request can be lodged through AECB's website.

However, if the company cannot reach a resolution through AECB's data correction tool, a dispute needs to be registered with AECB by emailing the required documents to [e-mail]. You can also call the contact centre on 800 287 328 to clarify any doubts regarding the process.

Felicity Glover, personal finance editor at 'The National'

I am sorry to hear that your business was affected by the pandemic and your company ended up in a legal dispute over unpaid bills. It has been a very difficult time for many businesses worldwide, so you are not alone.

However, it is good news that you have cleared the debt and the court found in your favour of paying Dh190,000 plus court costs rather than the incorrect Dh400,000 amount.

I am assuming that you have a clearance letter or other written evidence from the court that you have paid the amount in full. This is important to have as AECB will need this to remove the court case from your credit report.

I would suggest contacting AECB regarding your issue. As my fellow panellists have mentioned, you go do this through its website. You will also see that there is an informative section on how to dispute information on your credit report.

It's a fairly simple process: the first step is to gather all the evidence you have proving that the debt has been cleared, including confirmation from the court that it has been paid off. You will also need the Emirates ID of the business owner.

If a company representative is raising the dispute, you will need their Emirates ID, as well as the business owner's ID and a notarised Power of Attorney authorising them to challenge the credit report.

Next, fill in the dispute form on the website and attach your most recent AECB credit report and the documents supporting your case.

You can also visit an AECB office to register your dispute in person. It can take up to 20 working days for AECB to verify the dispute, according to its website.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to [e-mail]