Editorial

Members belonging to a profession are bound by a code of conduct. Hence, the oft-dishonoured claim: my word is my bond. We know or have heard of cases, local and international, trifling and massive, where this motto has been regularly breached.

Last Friday's seminar organised by the Malta Association of Credit Management (MACM) centred around the problem of dishonoured cheques. The MACM is very disturbed by the trend this delinquency is taking. In the presence of parliamentary secretary Edwin Vassallo, it called on the government to adopt draconian measures in an effort to stamp out the practice.

A draft bill envisages penalties of between Lm50 and Lm10,000 on conviction for a first offence, which is clearly over the top. Any subsequent conviction would bring on dishonourable heads a term of imprisonment of up to six months. The bill provides for a Register of Dishonoured Cheques - a good idea. In it would be recorded the names of those who dishonoured three cheques within six months, or cheques that exceed Lm500.

The association's concern about what lay people call "bounced cheques" is understandable. Reacting to a point, Mr Vassallo commented that he had checked with the banks on the percentage of dishonoured cheques and was informed that this was not high. Geoffrey D. Borg, the MACM president, remarked that if the rate of dishonoured cheques on nine million cheques drawn annually were a mere 0.1 per cent, this still meant 9,000 dishonourable payments.

Plastic cards have not made life easier for those account holders who genuinely forget to enter their plastic transactions on to their cheque books. In the case of cardholders, however, a payment can be frozen at point of purchase.

There is no doubt that there are people around who will make out a cheque knowing full well there are not the funds to meet the payment. The banks are aware of this every time an account is overdrawn. They expediently refer the cheque back so that clients who do not have a loan account to cater for overdrawals do not use the bank's money "illegally".

Here, surely, is the first point at which the war on dishonoured cheques should be waged. First, banks should explain to clients before these are issued with their first cheque book that making payments that will result in their bank balance going into overdraft is prohibited.

Second, there should be an automatic charge raised against any drawee who is out of balance in his account - say, Lm10.

Third, any client who issues a cheque he knows to be a dishonourable one will be warned that he has entered a game called three hits and you are no longer a client. The client's name will then be entered into a Register and passed on to other banks on the island.

Nor have banks that should have known better been particularly helpful in raising credit limits for clients who are clearly incapable of financing the overdrafts.

If there is to be legislation, it needs to be wider and more comprehensive than the terms that MACM has set itself. It must take into account three distinct publics and their responsibilities: the banks, account holders and aggrieved parties who are recipients of dishonourable cheques.