Dubai, Dec. 22, 2004 (WAM) -- The UAE Central Bankwill clamp down on the misleading way some banks advertiseinterest rates on various banking products, the Bank's governorsaid.

"I know this is an area of confusion for many unsuspectingbank customers," Sultan Bin Nasser Al Suwaidi, the Bank'sgovernor, told +Gulf News+.

He was referring to the flat rates being advertised by somebanks to encourage customers to take out loans. The issueis more pronounced for automobile loans, according to bankingsources.

Al Suwaidi said in the coming months the Central Bank willsend out circulars asking the banks to observe transparencyrequirements regarding interest rates.

"Even if an amendment to the existing law is required toimplement this, the Central Bank will proceed," he said.

Credit card interest rates are another troublesome area.

According to one banker, the interest being advertised oncredit cards is also often misleading, as most banks talkabout monthly interest rates.

"Interest charges are always calculated on an annual basis,"he said.

Al Suwaidi said the Bank is going ahead with a plan to setup a risk bureau in order to improve the customer ratingsystem. The Central Bank also has plans to establish newinformation gathering systems to monitor credit card customers,plus a national direct debit system.

Al Suwaidi said a task force will be formed soon to studythe setting up of the risk bureau. "The task force willdecide on the modalities of establishing the bureau, includingthe job of appointing a competent consultancy firm to takeup this job," said Al Suwaidi. The task force will alsointeract with the banks before moving forward with the project.

The purpose of the "negative" list is basically to identifycredit card customers who fail to meet payments.

The Central Bank is also keen to introduce a direct debitsystem. Customers could use this system, for example, tomake arrangements with utility companies to directly debittheir bank accounts for the money owed on water and electricitybills.

"This is in a very early stage of development. The commercialbanks have been given an opportunity to study the matter,as the banks will play a major role in the direct debitsystem," said Saeed Abdullah Al Hamiz, executive directorof the banking supervision and examination department atthe Central Bank.