Ask AJ: Installment Loans

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ach month we will be putting a legal problem to consultant Ali Al Jabal to answer.

This month – INSTALLMENT LOANS 

AJ Question: I bought a laptop for 500 BD from a retailer that offers an installment plan and I agreed with them to pay the premium over a period of 2 years. However, after losing my job I could not pay the monthly installments and I was surprised to find out that I was being sued by the retailer company, claiming 1200 BD premium. Citing that because I failed to pay the premium on the due date, an interest payment was added. Please help; I don’t know what to do? I’m sure this is unfair!

AJ Answer: According to the precedents held in previous court proceedings these types of transactions fall under the scope of Article 81 of the Bahrain Law of Commerce, which states that “A total interest charged by the creditor shall not exceed the principal amount on the basis of which interest is calculated. This provision applies to debts with a repayment period not exceeding seven years. Any contradicting stipulation shall be null and void.”

In your case, it is evident that the total interest payment (1200 BD) imposed by the creditor is in excess of the principal debt amount (500 BD). Moreover, the agreed repayment period is for two years which does not exceed the seven years statutory period. Accordingly the stipulation is null and void to the extent to which they increased the interest in excess of the principal amount.  On this basis, you could request that the court declare the stipulation contained in the contract to be null and void.

To contact Ali Al Jabal at 
Al Jabal Consultancy

Attorneys and Legal Consultants
Tel: +973 17 530 400 
E-mail: info@aljaballaw.com 
www.aljaballaw.com

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