Abu Dhabi Court of Cassation affirms “adequate security” in consumer credit enforcement

On 28 August 2025, the Abu Dhabi Court of Cassation issued a significant judgment that clarifies what constitutes “adequate security” for consumer credit and consolidates the operation of Article 121 bis of the Central Bank Law with the Central Bank’s regulatory instruments—including Circular No. 3 of 2023 (supplementing Circular No. 9 of 2022)—and the 2011 Regulations on bank loans and services to individual customers. The Court overturned a dismissal for lack of adequate security and directed that the claim proceed, holding that a package comprising a salary certificate, loan insurance and a single guarantee cheque for the full facility amount met the “adequate security” threshold, notwithstanding the borrower’s loan exceeding twenty times monthly salary.  In doing so, the Court established a clear, practicable framework for both admissibility and execution in consumer credit enforcement, one that binds lenders procedurally and protects borrowers substantively.

Key Findings

 The Court of Cassation held that a bank’s civil claim to enforce a personal loan is admissible where the bank has obtained “adequate security” within the meaning of Article 121 bis and the Central Bank’s consumer credit regulatory scheme. On the facts, the bank had taken multiple forms of security: a salary certificate evidencing income, loan-related insurance, and a cheque in the full amount of the facility. The lower court had dismissed the claim on the basis that the loan exceeded twenty times the borrower’s salary and therefore the guarantees were insufficient. The Court of Cassation reversed, finding that:

First, Article 121 bis requires licensed financial institutions to obtain adequate guarantees commensurate with income and the amount of the facility, failing which judicial or arbitral claims are inadmissible. The Court placed the statutory admissibility bar squarely on the presence of “adequate security”, not on income-multiple thresholds per se.

Second, the Court interpreted Circular No. 3 of 2023 (supplementing Circular No. 9 of 2022) as mandating that enforcement be confined to the security accepted by the financial institution, and that this regime applies across all banking disputes involving credit facilities irrespective of contract date and borrower type. In practical terms, once the bank proves it holds the accepted guarantee, it may pursue enforcement to the extent of that guarantee.

Third, the Court treated the 2011 consumer credit regulations (Regulation No. 29 of 2011, as amended) as the operative reference point for Article 121 bis in the consumer context. Those regulations authorise banks and finance companies to obtain from the customer post-dated cheques covering instalments up to 120% of the loan or outstanding balance, and recognise such cheques as security for the total loan amount and accrued interest/profit. The Court concluded that a single deferred cheque for the full facility amount constitutes adequate security, whether given as one cheque or multiple cheques.

Fourth, the Court stated expressly that any breach of prudential guidance—such as a loan amount exceeding twenty times the borrower’s salary—may expose the lender to administrative consequences under Central Bank supervision. However, such breach does not render a civil claim inadmissible where adequate security is otherwise in place. The admissibility test is met if the bank holds the recognised guarantee; prudential violations are dealt with administratively, not through dismissal of civil proceedings.

Finally, the Court remitted the case for reconsideration, holding that the combination of salary evidence, insurance, and a deferred cheque for the full amount satisfied the adequate security requirement and required the claim to proceed. This provides a clear, lender-facing and borrower-facing framework for what qualifies as adequate security and how enforcement must be confined to the accepted guarantees.

Consolidation of Article 121 bis, Circulars, and 2011 Regulations

 The court in this case considered and applied three key laws. Article 121 bis of the Central Bank Law imposes a jurisdictional admissibility bar: without adequate guarantees calibrated to income and facility size, the courts and arbitral tribunals must decline claims brought by licensed institutions. Circular No. 3 of 2023, supplementing Circular No. 9 of 2022, operationalises enforcement by restricting recovery to the accepted collateral provided to the bank, and confirms universal application across disputes regardless of contract timing or borrower category. The 2011 consumer credit regulations supply the substantive definition of what can constitute adequate security in the retail context, specifically validating post-dated cheques up to 120% of the loan as a recognised security mechanism for the full debt and its uplifts.

Together, these laws create a layered framework: Article 121 bis sets the admissibility threshold; the Circulars define the scope of enforcement against the accepted guarantee; and the 2011 regulations clarify what qualifies as adequate consumer security. The Court’s judgment articulates the interplay and hierarchy between these sources, ensuring lenders and borrowers can reliably predict when claims are admissible and to what extent enforcement may proceed.

Key Takeaways

 The Court of Cassation has clarified the rules for consumer credit enforcement. The key takeaways are:

• Under Article 121 bis, a lender’s claim against an individual borrower is admissible where the lender holds adequate guarantees aligned with income and the facility size. The Court confirms this is a jurisdictional prerequisite.
• Enforcement is confined to the accepted guarantee. Circular No. 3 of 2023 (supplementing Circular No. 9 of 2022) requires that civil enforcement be limited to the security accepted by the bank, with universal application regardless of contract date or borrower category.
• Prudential breaches do not bar civil claims. Exceeding income-multiple caps (e.g., twenty times salary) may trigger Central Bank administrative consequences but does not render civil claims inadmissible where adequate security exists. The enforcement forum remains available if the threshold is met.
• The judgment integrates Article 121 bis, the Circulars, and the 2011 regulations into a coherent schema, giving lenders a clear admissibility path and borrowers defined enforcement limits, thereby improving litigation predictability.

Conclusion

The Abu Dhabi Court of Cassation’s judgment dated 28 August 2025 is an important judgment in consumer credit enforcement. It establishes that judicial admissibility turns on adequate security under Article 121 bis and confines enforcement to the accepted guarantees per Circular No. 3 of 2023 and Circular No. 9 of 2022. The Court ensured that civil claims proceed where adequate security is present while leaving supervisory infractions to the Central Bank’s administrative jurisdiction. For lenders, this judgment provides operational certainty and confirms that a bank may pursue civil enforcement to the extent of a guarantee.

For more information on this judgment, please contact Ammar Haykal, Partner, Head of Office – Northern Emirates and Mohamed Gaber Abdelsabour, Senior Counsel, Dispute Resolution.