Credit Congress ’10: Executive Exchange Session a Hit

Part of NACM's ever-evolving Credit Congress this year in Las Vegas included what was perhaps the biggest hit of 2010's Credit Congress-the new forum-style Executive Exchange Sessions.

The Executive Exchange Sessions gave attendees a chance to attend a three-hour session on one of six topics-bankruptcy, building and construction, credit and collections, international issues, performance metrics and agriculture/steel/commodities-during the second day of the happenings at this year's host venue, the Rio Hotel. The sessions drew large crowds and, by all accounts, the highly interactive format of each left attendees feeling more engaged with panelists than ever.

One of the top draws was the Executive Exchange session on credit and collections, moderated by former NACM Chairman Mark Tuniewicz, CCE. The session was comprised almost entirely of answering direct questions from the audience. Not surprisingly, the question "What is the next big thing in credit and collections?" was among the highlights.

Scott Tillesen, CCE, director of credit for the Florida-based Tech Data Corp, said the future of the industry is all about increased productivity and automation. He said businesses need to find ways to reduce the number of traditional, paper-based files they're hanging on to and implement systems that allow important data to be continually piped in, instead of being researched when needed. Tillesen noted, "Data is cheap once you have a system in place."

"It all goes hand in hand," said Tillesen. "Automation in a way gets rid of the paper and looks for data flow that isn't human intensive. You don't want to spend one minute looking for information that could come to you automatically."

Tuniewicz commented that having an adaptive, flexible policy could and should be big in credit and collections moving forward. He said there are many benefits to being able to segment one's customer base into categories such as who is profitable and who isn't as well as who is trending up and who is trending down. Such policies can greatly help anticipate when a customer might be about to fall on hard times.

The following is just a small sample of other topics covered during the session:

Question from attendee: "I have $150 million in A/R with no credit checks on file. Where would you start to implement a credit investigation?"
Answer: Said Stanford Cramer, corporate VP of IAB Solutions LLC, "[Conduct] an ABC analysis and segment it into larger balances and work your way down. And you may want to hire some more staff, too." Said Tilleson, "If you have that much, go out and buy some data quickly. For three or four bucks a piece, you can score the whole portfolio and find out where the largest risks are."

Q: An attendee asks about the trend of outsourcing in credit and collection.
A: Said Tuniewicz, "In fairness, I'm aware of a lot of firms that outsourced their A/R and brought them back. What we do is personal. What we do is different. What we do is about touch."

Q: What are the best practices for processing credit cards?
A: Said Tuniewicz, "Find a processing firm that works for you. My advice, stay away from the huge ones...you're likely to be a speck. Find one with an office near you. They have incentive. They will walk you through the steps."

Q: An attendee asks about ways to spot fraud before it's too late.
A: Tilleson talks about having a good frontline defense, which starts with having the sales department trained to spot "red flags" (not the Federal Trade Commission kind): "We're subject to a lot of fraud... If someone's not negotiating on the price, you've got to wonder why they're even placing the order with you. Check orders outside of their normal buying patterns. We still want our sales staff to be the first line of defense against fraud." He added that someone buying sophisticated gear is less likely to be planning fraud because such items can't easily be sold "at a flea market," for instance. Now, items like printer cartridges, for example, are a totally different story, Tillesen said.

Most Credit Congress sessions can be ordered on CD-Rom. To get your desired sessions, order today by clicking here.

Brian Shappell, NACM staff writer

BREAKING: FTC Delays “Red Flags” Enforcement Till December 31, 2010

Citing Congressional requests and pending legislative changes, the Federal Trade Commission (FTC) again delayed the enforcement date for their "Red Flags" Rules. Originally, enforcement was to begin next week, on June 1, 2010, but has been delayed through December 31, 2010.

In its release on the subject, Commission Chief Jon Leibowitz urged Congress to act quickly in passing legislation that limits the scope of the Rules, which are designed to require "creditors" and "financial institutions" to address the risk of identity theft. "Congress needs to fix the unintended consequences of the legislation establishing the 'Red Flags' Rules -- and to fix this problem quickly. We appreciate the efforts of Congressmen Barney Frank and John Adler for getting a clarifying measure passed in the House, and hope action in the Senate will be swift," said Leibowitz. "As an agency we're charged with enforcing the law, and endless extensions delay enforcement."

The FTC warned, however, that the enforcement date could be moved up, should legislation be passed with a new date. "If Congress passes legislation limiting the scope of the Red Flags Rules with an effective date earlier than December 31, 2010, the Commission will begin enforcement as of that effective date," said the FTC in a statement.

NACM has continued to cover the "Red Flags" Rules, and the ways they might affect business creditors, in Business Credit magazine, NACM's weekly eNews, and on its blog.

Below is a full copy of the release posted on the FTC's website. Stay tuned to NACM for any more updates:

FTC Extends Enforcement Deadline for Identity Theft Red Flags Rules

At the request of several Members of Congress, the Federal Trade Commission is further delaying enforcement of the "Red Flags" Rules through December 31, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rules. Today's announcement and the release of an Enforcement Policy Statement do not affect other federal agencies' enforcement of the original November 1, 2008 deadline for institutions subject to their oversight to be in compliance.

"Congress needs to fix the unintended consequences of the legislation establishing the Red Flags Rules -- and to fix this problem quickly. We appreciate the efforts of Congressmen Barney Frank and John Adler for getting a clarifying measure passed in the House, and hope action in the Senate will be swift," FTC Chairman Jon Leibowitz said. "As an agency we're charged with enforcing the law, and endless extensions delay enforcement."

The Rules were developed under the Fair and Accurate Credit Transactions Act, in which Congress directed the FTC and other agencies to develop regulations requiring "creditors" and "financial institutions" to address the risk of identity theft. The resulting Red Flags Rules require all such entities that have "covered accounts" to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities -- known as "red flags" -- that could indicate identity theft.

The Rules became effective on January 1, 2008, with full compliance for all covered entities originally required by November 1, 2008. The Commission has issued several Enforcement Policies delaying enforcement of the Rules. Most recently, the Commission announced in October 2009 that at the request of certain Members of Congress, it was delaying enforcement of the Rules until June 1, 2010, to allow Congress time to finalize legislation that would limit the scope of business covered by the Rules. Since then, the Commission has received another request from Members of Congress for another delay in enforcement of the Rules beyond June 1, 2010.

The Commission urges Congress to act quickly to pass legislation that will resolve any questions as to which entities are covered by the Rules and obviate the need for further enforcement delays. If Congress passes legislation limiting the scope of the Red Flags Rules with an effective date earlier than December 31, 2010, the Commission will begin enforcement as of that effective date.

In the interim, FTC staff has continued to provide guidance, both through materials posted on www.ftc.gov/redflagsrule, and in speeches and participation in seminars, conferences and other training events to numerous groups. The FTC also published a compliance guide for business, and created a template that enables low risk entities to create an identity theft program with an easy-to-use online form (www.ftc.gov/bcp/edu/microsites/redflagsrule/get-started.shtm). The FTC staff also has published numerous general and industry-specific articles, released a video explaining the Rules, and continues to respond to inquiries from the public. To assist further with compliance, FTC staff has worked with a number of trade associations that have chosen to develop model policies or specialized guidance for their members.

As was the case previously, this enforcement delay is limited to the Red Flags Rules and does not extend to the rule regarding address discrepancies applicable to users of consumer reports (16 C.F.R.§641), or to the rule regarding changes of address applicable to card issuers (16 C.F.R.§681.2).

For questions regarding this Enforcement Policy, please contact Naomi Lefkovitz or Pavneet Singh, Bureau of Consumer Protection, 202-326-2252.

Italy Unveils Austerity Plan; Impact on U.S. Businesses Likely to Be Indirect

With Italy now joining Greece and Spain in unveiling new austerity plans to curb debt, belt tightening - or at least promises to do so - appears to be en vogue among the historically loose spenders of southern Europe. Still, U.S. businesses and credit markets are unlikely to see much of a significant direct impact quickly as a result.

The Italian parliament approved a two-year austerity package this week worth nearly $30 million (USD) to help combat its long-growing budget deficit that, like shortfalls in other "PIIGS" nations Greece and Spain, have frightened investors, creditors and ratings agencies alike in the United States and throughout the world. The Italian plan, sure to draw protest from its entitled public sector employees and unions, includes a three-year freeze on public sector wages, cuts for top level ministers and parliamentarians of up to 10% of annual salaries, delays in retirement age eligibility starting in 2011 and abolition of small provincial governments and publicly funded think-tanks.

And though the recently struggling euro did rally a bit in days following the announcement, experts appear suspicious of Italy's true belt-tightening intentions.

"I think the plan is just to forestall the international speculators," said Chmura Economics & Analytics Senior Economist Xiaobing Shuai. "[Despite a massive budget deficit], their situation was not as severe as Greece or Spain. I think they do not want to become a target."

Shuai as well as Zach Witton, an economist with Moody's Analytics, agree the austerity plan could help in boosting confidence in some semblance of European Union stability. However, that impact will only affect the U.S. economy and credit availability in indirect ways, such as keeping the euro from losing further value.

"The three-year civil service nominal wage freeze along with the across-the-board 10% cut in government departments have the potential to put downward pressure on imports - However, the U.S. is not among the top five sources of merchandise imports to Italy," said Witton. Additionally, the top U.S. exported products, related to the pharmaceutical and aircraft industries, are unlikely to be connected to spending from public sector employees.

Witton added that credit flows coming from Italy are likely to be affected by more than just what's happening domestically, including the new austerity plan. "Italian banks will not start to ease credit conditions until investor concern about the Greek debt crisis spreading to other countries in the region subsides and Italy's economic recovery gains momentum," he noted.

Brian Shappell, NACM staff writer

Senate Passes Financial Reform, President Expected to Sign Final Package by July

On Thursday (May 20) evening, the Senate passed 59-39 down largely partisan lines its version of sweeping financial reform, The Restoring American Financial Stability Act of 2010 (S 3217), which focuses on everything from swipe fees to derivatives trading regulation. Senate Banking Committee Chairman Christopher Dodd (D-CT) and House Financial Services Chairman Barney Frank (D-MA), who helped spearhead a similar version out of the House months ago, say they should be able to craft final legislation from the two versions of reform within a month. Both expect the president to sign the reform legislation into law by July.

Dodd on the vote:
"With passage of the Wall Street Reform bill we have taken a major step towards creating a sound economic foundation for the American people we represent.  This is their victory.
For the first time ever we will have a Consumer Financial Protection Bureau to watch out for the average citizen in our country when they are abused by a financial market place that takes advantage of them on home mortgages and credit cards.

For the first time ever, we will have transparency and accountability for derivatives with mandatory clearing and exchange trading.

For the first time ever, we will have a system in place, so that when a giant company fails, it fails, its management is fired, its shareholders and creditors are wiped out, and never again will taxpayers be forced to bail them out.

For the first time ever, we will have an advance warning system, so somebody is on the lookout for the next big problem in the economy before it's too late to do anything about it.
The debate we have had, covering four weeks, considering close to 60 amendments from members of both parties, represents the Senate at its best.  I look forward to working with my colleagues in the House to produce a strong bill that will protect consumers, protect our economy, and hold Wall Street accountable."

Statement from Senate Minority Leader Mitch McConnell (R-KY):
"How do you justify new costs and regulations on small businesses struggling to dig themselves out of a recession while the biggest banks, the ones that caused it, don't seem to mind them? How do you explain how a bill that was supposed to end bailouts will be used to collect financial data on Americans?

"Look: the only thing you need to know about this bill is that a bill that was meant to rein in Wall Street is now being endorsed by Goldman Sachs and is opposed by America's small businesses owners, community banks, credit unions and auto dealers. A bill that was supposed to rein in Wall Street is opposed by the Chamber of Commerce, but supported by Citigroup."

Credit Congress ’10: Honors & Awards Winners

Each year at NACM's Credit Congress the association takes the time to honor those who have worked tirelessly to reach the pinnacles of achievement in credit management, whether it's through outstanding service to the organization or a strikingly strong commitment to credit education. This year's honorees epitomize these values!

Monday's award winners, honored that morning at the General Session were:

Dave Beckel, CCE, of MiTek Industries - National Credit Executive of the Year

Barbara Condit, CCE, of SPS Companies - CCE Designation of Excellence

Michele Cleaver, CBF, of Omron Health Care - CBF Designation of Excellence Award

Mary Reschke, CBA, of Elkay Manufacturing - CBA Designation of Excellence Award

Shane Inglesby, CCE, of Geneva Rock Products - Mentor of the Year

John Zummo, CCE, of BP Products North America & Ron Sereika, CCE, of Cooper Vision - Robert Half International Instructors of the Year

Beth Voecks, CBA of Briggs & Stratton - Robert Half International Student of the Year

Dawn Wallace Cook, CCE of Newton Manufacturing Co. - Alice M. H. McGregor Award

Other honors, including membership growth awards, were given out at Tuesday morning's Super Session. This year's membership winners were:

Southwest Business Credit Services

NACM East Tennessee

NACM Upstate New York

NACM Midwest

The Federation of Credit & Financial Professionals

This year's Best Student Award for NACM's Graduate School of Credit & Financial Management's class of 2009 was also awarded at Tuesday's Super Session, to Geert Jan Van Haastrecht, CCE, CICP, of Cisco Systems International B.V.
Congratulations to all this year's award winners!

Jacob Barron, NACM staff writer

Credit Congress '10: Getting Around Credit Card Fees Possible

For many vendors, especially small businesses, taking credit cards for payment from debtors continues to be wildly unpopular because of fees associated with their use. However, a 2010 Credit Congress panel said there are some ways to circumvent losing profits to interchange and swipe fees.

Panelists in a May 19 session titled "The Inevitable Change--A Panel Discussion of the Ever-Changing Payments Environment," noted it can be legal to implement some "convenience fees" as long as it's worded as such and a consistent practice for all customers. Tom Sacher, CCE, CEW, of Watsco Inc., warned attendees the fee cannot in any way be referred to as a surcharge.

Such convenience fees are becoming more popular -- They're common with universities and government agencies including the Internal Revenue Service. But that doesn't mean the credit card companies are encouraging this out of small businesses, and they've set up lengthy sets of rules at Mastercard and Visa to discourage the practice.

"There are a lot of hurdles," said Sacher. "I would caution you about doing it on an informal basis. Mastercard and Visa do not like it and set up hurdles. It has to be a bona fide convenience outside of normal means of payment...You can't do it for some and not others."

Additional, a small business has to change a flat fee for such a convenience charge, not by percentage, regardless of how large the purchase is. However, if your business can't get through the laundry list of qualifications to charge such convenience fees, it is allowable to instead provide a discount for those using cash, a la gas stations, and/or simply pay attention to a debtors' payment patterns and adjust their pricing on the actual goods accordingly.

"We have customers set up on a pricing basis," said Barbara Condit, CCE, SPS Companies Inc. "We adjust our pricing to cover the fees we're going to be absorbing. We get our money back."

Brian Shappell, NACM staff writer

Credit Congress ‘10: Annual Business Meeting and Keith McFarland at Super Session

Tuesday at Credit Congress opened with the Super Session and Annual Business Meeting, giving attendees the news on the state of their association as well as a chance to hear valuable insights to take back to their companies.

NACM Chairman Phyllis Truitt, CCE opened with an appeal to members to continue their support of the many products, services and opportunities available through NACM. "As I mentioned yesterday, 2009 was a challenging year for NACM," said Truitt. "This is where we come in: We, the NACM members, can help grow our association by being aggressive marketers of all that NACM has to offer."

Truitt then turned things over to NACM President Robin Schauseil, CAE to deliver this year's membership growth awards, honoring NACM affiliates who expanded their numbers in 2009. Schauseil also awarded Geert Jan Van Haastrecht, CCE, CICP with the 2009 Graduate School of Credit & Financial Management's Best Student Award (stay tuned to NACM's blog for more updates on this year's award winners).

Other guests at the Super Session included NACM Economist Chris Kuehl, Ph.D., on hand to discuss the unique value of NACM's Credit Managers' Index (CMI), President of the Dutch Credit Management Association Mannes Westhuis, who presented NACM with its 2010 friendship award, and ACM and United Tranz*Actions President, Dean Middleton, who once again generously pledged his organization's commitment to NACM and its members. "We know that the year has been challenging and we know that businesses will continue to be challenged as our economy continues to heal," said Middleton. "I want you to know that United Tranz*Actions will stand by you as you navigate your way through the business environment."

"We've got your back, and we'll continue to stand by you," he added.

Finally, Keith McFarland delivered his presentation, based on his two best-selling strategy books "The Breakthrough Company" and "Bounce." McFarland's appearance was sponsored by Experian, who also offered his books for sale at their booth in the Expo hall.

"We looked at 7,000 private companies and asked how they extend their growth, not for years, but for decades," said McFarland, referring to the research conducted for "The Breakthrough Company." "We found that great companies aren't built in good times; they're built during the bad times. They became a great company because of the hard things they've gone through." McFarland also encouraged attendees to remain positive about their chances in their industry. "We spend too much time looking at other industries and saying how good theirs is and how bad ours is," he noted. "All of these great companies entered the business at a time when it looked bad."

"It's not what you make," said McFarland, "it's what you make of it."

Stay tuned for more 2010 Credit Congress updates!

Jacob Barron, NACM staff writer

Credit Congress '10: Look Within Own Ranks, For Warning Signs When Dealing with Large Customers

Landing a business relationship with a large company could pay many dividends for a vendor. However, dealing with big business can include different dangers and require varying levels of credit analysis, said panelists at a Tuesday Credit Congress session titled, "Pragmatic Approaches to Quickly Analyze Large Credit Risks."

While landing an account with a large company can mean a significant boost in revenue, Camilo Gomez, oPh.D., of Lone Pine Mesa Consulting, noted it can be a double-edged sword, so to speak. "When a lot of your revenue is coming from one place, that can be a little dangerous," said Gomez. However, Gomez noted dealing with a large company that is publicly traded comes with the advantage of having more, credible information on the company via various required filings and stock market data than is usually available on smaller, private firms.

Ed Bell, CBA, CICP, W.W. Grainger Inc., notes having a policy to deal with smaller transactions from larger companies quickly is critical, asking "if it's only $20,000, do I really need to approve that transaction?" Bell stressed that credit departments need to ensure they strengthen relationships with operational and sales department partners so that the large company coming on board provides a variety of critical information.

Bell also touched upon the importance of looking out for key warning signs, both when just starting the business relationship and once it is firmly established, that the large company is in some level of distress. Bells' top 10 watch topics are as follows:
  • Changing payment patterns
  • Changing buying or selling habits (such as loading up on inventory from you)
  • Shrinking cash flow
  • Sudden high customer demands (e.g., asking for discounts or terms)
  • Large accruals
  • Withholding financial information
  • High DSO with your company or others
  • Changes in management, especially sudden ones
  • Persistent negative rumors
  • Tax Liens
Brian Shappell, NACM staff writer

Credit Congress '10: Greece, 'PIIGS' Continue as High Concern

Despite bailouts and confident talk coming out of the European Union, Greece and other high debt European nations known as the PIIGS (Portugal, Ireland, Italy, Greece and Spain) were a significant concern at this year's Credit Congress in Las Vegas. And the ongoing problems could lead some nations to attempt controversial exits from the European Union entirely.

NACM and FCIB Economist Chris Kuehl told conference attendees that troubles in Greece have been building for 50 or 60 years, so their latest financial meltdown should come as no surprise. This is the same nation that threatened to align with the Soviet Union during the Cold War in an attempt to get bailout money in the 1980s and also swindled its way into hosting the 2004 Olympics even though the nation was in no way able to pay for even a fraction of the costs without handouts from other European nations.

EU counterparts are demanding Greece moves into greater financial practicality with an austerity plan, perhaps an unrealistic one, that's more conservative than anything even Germany has done in the past, said Kuehl. Additionally, there's infighting between private-sector employees who are bitter that public-sector employees, which include a large number of people working political kickback jobs with little real responsibility, are fighting proposed rollbacks of lavish benefits and pay packages.

"All they're being asked to do is something unprecedented," Kuehl joked. He added that the other PIGGS, though they haven't come knocking for a bailout just yet, each have their own deep problems to deal with in the coming years:

Portugal - "Like the Flint, MI of Europe." They simply don't have a lot of things going on to raise commerce. It's not new, it's just finally being noticed.

Ireland - Overgrew during the real estate boom years, which caused a lot of immigration to Ireland. The more educated from the United States and Canada took a lot of the technology-based jobs. Meanwhile, immigrants from nations such as Hungary and Czech Republic took the service jobs. The combination ran a lot of nationals into long-term unemployment or out of the country entirely. "I was in Ireland for three days and hadn't met an Irishman."

Italy - Major divisions between various political factions, including the more financially conservative Northern League and a new wing of the fascist party headed by Benito Mussolini's granddaughter. The business community, which isn't very intertwined with the nation's government, has preformed relatively well despite the recession, however.

Greece - see above.

Spain - The commercial boom was too hot, and it left a huge percentage of the population who worked in construction without jobs. As such, overall unemployment exceeds 20% (construction unemployment is a staggering 63%). The sector is "an absolute catastrophe" and is affecting many aspects of life in Spain.

All of these problems with the PIIGS have helped fuel the fire of those who don't believe in the euro's chances for long-term sustainability. Kuehl predicts that at least two or three European nations will either try to leave the EU or, if they're being considered for membership, may simply say "no thanks" to the invite to join in the coming years. Germany, tired of having to play a major benefactor role in the Greek bailout and possible other ones down the line, stands as the most likely to do so. Such a move would cause political and financial chaos throughout the EU but would be wildly popular with a majority of Germans who believe the country should revert to the Deutschmark.

Brian Shappell, NACM staff writer

Credit Congress 2010: Chester Elton Delivers Rousing General Session Presentation

NACM's 2010 Credit Congress is currently underway at the Rio Hotel in Las Vegas!

Opening officially on Sunday evening at the grand opening of the Expo Hall, the event continued this morning with an introduction and welcome by NACM's Chairman, Phyllis Truitt, CCE. "As frequently as you've seen it portrayed on TV or in film, few things impress and overwhelm us like the Vegas skyline," said Truitt. "It's great to be back in Las Vegas. I thank all of you, our members, for taking the time to support our association and our profession by attending this year's Credit Congress."

Truitt presided over the morning proceedings before turning the podium over to Honors & Awards Committee Chairman, and 2010 Credit Executive of the Year, Dave Beckel, CCE, who presented this year's awards to their recipients (keep tuned to the blog for more information on this year's winners).

After all the awards were taken care of, Truitt then welcomed Chester Elton, motivation and recognition specialist and co-author of New York Times best-seller "The Carrot Principle." Called the "apostle of appreciation," Elton delivered a rousing presentation to a rapt room of attendees, eager to take advantage of Elton's unique insights into the world of recognition-based management.

Elton implored attendees to engage their employees in a deeper way. "Engagement makes sense," he said. "It's just flat out good business." He also noted that, contrary to conventional wisdom, money isn't really the best motivator. "The average raise is 3%," Elton noted. "Is 3% life changing?" Instead, managers should work to recognize the best in their employees and make them aware of it. "Recognize excellence, and that's the thing: it's excellence," he noted, cautioning the attendees not to overdo anything. "It's not rewarding people for arriving on time, three days in a row, sober," he added, to laughter from attendees. "Rewarded behavior gets repeated. It's common sense, uncommonly practiced."

In addition to his motivational and, at many times comical and even inspirational, words, Elton punctuated his presentation with video clips, songs, and audience participation, and even threw out stuffed toy carrots and "The Carrot Principle" frisbees to the delighted crowd.

Stay tuned for more updates right here on NACM's Credit Real-Time Blog!

Jacob Barron, NACM staff writer

Small Biz Optimism Grows; But Concern Over CARD Act Still Looms

In a year already full of one step forward, one step backward economic predictions, May has been marked with yet more mixed messages. While one new survey found small business owners optimism strengthening, another reflected mounting fear over potential costs associated with credit card "reform" efforts.

A newly unveiled Wells Fargo/Gallup poll conducted in April finds small businesses are significantly more confident now than in July 2009. The Wells Fargo/Gallup Small Business Index returned a score of -11 for owner optimism, a five-point improvement from the previous quarter's study (conducted in January) and 10 better than that of July. A score of zero is considered a neutral outlook, said Wells Fargo.

"We see more small businesses describing their cash flows and current financial situation as good, and higher percentages [are] seeing an increase in revenues over the last 12 months," said Wells Fargo Senior Economist Scott Anderson. But even Anderson admitted a significant number of small business owners remain somewhat skeptical about the sustainability of the economic recovery.
Meanwhile, Web-based financial search engine/blog BillShrink unveiled its own study indicating small business owners could face more than $420 million in credit card finance charges in 2010 because the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act doesn't extend the same protections to businesses as it does for consumers. As such, BillShrink argued credit card companies could raise interest rates on old balances as a way to make up for revenue it loses amid brand new, sweeping consumer protections. In its survey of 300 small businesses, a significant number of respondents reported receiving a 15% rate increase since the CARD Act Passage. Some saw as much as a 27% hike, said BillShrink.

"We did this research to shed light on the fact that small businesses are victim to the same egregious rate hikes consumers experienced before the oversight laws went into effect earlier this year," said BillShrink CEO Peter Pham. "The lack of regulation, coupled with shrinking access to credit is forcing many business owners to shift spending onto their personal cards, which can become a dangerous cycle negatively impacting their credit scores."
However, in the days since the survey's release, proposed amendments to a sweeping financial reform package preliminarily include provisions addressing swipe fees.

Brian Shappell, NACM staff writer

Senate Votes Swipe Fee Provisions Into Financial Reform Bill

Financial reform legislation appears ready for a U.S. Senate floor vote as early as next week and, thanks to an amendment from an Illinois senator, the bill now includes greater relief for U.S. businesses on the issue of swipe fees.

The Senate voted 64-33 on May 13 to pass an amendment, sponsored by Senate Majority Whip Richard Durbin (D-IL), to the Restoring American Financial Stability Act of 2010 designed to help address what the lawmaker and scores of small businesses characterize as "excessive" fees and underlying "anti-competitive" practices on the part of credit card companies. Under the proposed reform provisions, the Federal Reserve would gain authority to regulate interchange fees, or swipe fees, and ensure such fees are administered in “reasonable” proportions.
The measure still has a long way to go given the possibility of additional floor debate and behind-the-scenes negotiations on the reform package, which is being spearheaded by Senate Banking Committee Chairman Christopher Dodd (D-CT) and appears virtually certain to be voted on before month’s end.

Durbin, backed by about 134 trade associations, endorsed proposed improvements to the regulation of credit card companies, citing that interchange and or swipe fees have become a way for creditors to circumvent many of the CARD Act's intended reforms. The group of trade associations contended that more than 80% of these interchange fees have been collected by the 10 largest banks operating in the United States.

Another group in opposition of the escalating swipe fees, the Merchants Payment Coalition, applauded the Senate vote in the hours following the May 13 session, saying senators “did the right thing by voting in favor of merchants and consumers.”

Swipe fees have spiraled out of control in recent years, and this amendment is necessary to rein in these excessive fees and ensure that Main Street receives a fair shake,” the Merchants Payment Coalition said in a statement following the vote. “These fees are harmful across the board – from large businesses to small retailers to American consumers.”

Brian Shappell, NACM staff writer

Nevada Governor Trying to Solve Perini-MGM Mechanic’s Lien Stalemate

Following requests from the Perini Building division of Tutor Perini Corp. and outcry from hundreds of subcontractors owed up to $400 million for work on a massive mixed-use Las Vegas Strip development venture, the state governor confirmed he's trying to get warring parties to settle differences out of court.

Nevada Gov. Jim Gibbons pledged to meet with Perini next week in what appears to be an unofficial intervention between the contractor and MGM-Mirage over the $492 million mechanic's lien filed in relation to the massive CityCenter project on the Las Vegas Strip. Gibbons said he hopes the sides can come to terms on the expensive dispute outside of court so that several hundred subcontractors who worked under Perini, which served as the general contractor on the $8.5 billion venture, can get paid quicker. Many companies have been peppering lawmakers, including Gibbons and even Senate Majority Leader Harry Reid (D-NV), who is running for reelection in November, with requests for help because. Between delays in payment and a local economic downturn that outpaced most cities in the nation, many subcontractors face financial peril should a lengthy court battle develop between Perini and MGM.

But even Gibbons admitted he is unclear how much authority the state can impose regarding CityCenter, which includes hotels, a resort-style casino, high-end retail and luxury condominium housing.

Perini, named Nevada's top contractor in recent years by publications Southwest Contractor and In Business Las Vegas, alleges MGM Mirage abruptly stopped paying for work already completed, specifically at the Harmon Hotel portion of the mixed-use CityCenter. The suit also contains Perini's allegations that MGM Mirage made thousands of change orders on the project's design well after an agreed-upon deadline. For its part, MGM Mirage has publicly threatened its own suit against Perini, which served as general contractor, amid allegations of numerous design and construction defects. Representatives from both sides have declined numerous requests for comment issued by NACM. MGM Mirage has yet to file the aforementioned suit or a legal response to Perini's original suit, which must occur in the coming days.

In a written communication between Perini and subcontractors obtained by NACM, the contractor says it was notified by MGM Mirage on March 17th that "no further payments were going to be made" to the general contractor and all subcontractors associated with the CityCenter project. Perini disputes claims of unacceptable work and noted that it could make no payments to the many subcontractors that worked on CityCenter "until these issues are resolved and Perini is paid\ by MGM."

The legal spat is the latest in a series of trouble signs for the epic venture, the most expensive private development in U.S. history at its inception. Though the opening of its CityCenter's casino (Aria Resort & Casino) and various retail offerings was hailed as a victory for the previously struggling MGM Mirage, the project had to deal with a national economic meltdown shortly after construction began, a housing and commercial real estate downturn that forced a surge in Las Vegas vacancy rates and a freefall in values, a controversy surrounding the perceived high number of worker deaths in the construction of the development and the downsizing of the Harmon Hotel to 26 stories from original plans to build nearly 50 stories.

Although the amount of the mechanic's lien represents less than 10% of the total project, it still stands as one of the most expensive filings in U.S. history.

Brian Shappell, NACM staff writer

BP Facing Credit Downgrade, Steep Climb Back to Prominence

As BP continues to wrestle with containing an oil spill in the Gulf of Mexico, the company faces a likely negative mark from at least one of the three major credit ratings agencies. But that might just be the tip of the iceberg for a company that would be characterized as cavalier on maintenance and safety issues in its operations in recent years.

Moody's Investors Service is the first of the ratings big three to chime in following BPs disastrous, ongoing oil spill stemming from an April 20 explosion that killed 11 oil rig workers. Moody's revised its credit outlook for Aa1 senior unsecured BP ratings to negative, from stable.

"Moody's action reflects the considerable uncertainty associated with the financial liabilities and clean-up costs that BP may incur as a result of the oil spill in the Gulf of Mexico," Moody's said in a May 5 statement. "It remains impossible at this stage to assess the full extent of the costs and business impact of this accident on BP's results."

NACM Economist Chris Kuehl, of Armada Corporate Intelligence, said the long-term impact of the spill should not hurt the U.S. economy in a sense of drastic price increases and supply concerns or even the oil industry itself. That is unless the incident helps permanently steer lawmakers far away from offshore drilling.

"You're certainly going to see a lot more scrutiny involved," said Kuehl. "But, at this moment, this is pretty much a one-company disaster." He added that even most local industries, including the shrimping and tourism sectors, largely won't be crushed because of the areas the spill affected most.

However, BP itself may find its future efforts to expand into new markets substantially stymied because the latest debacle will denigrate its negotiating strength relative to virtually all of its large competitors. That's not to mention what some already considered an ongoing spotty operational record thanks to problems with leaking pipelines, equipment and/or maintenance problems in areas including Canada, Alaska and Nigeria. Additionally, Kuehl notes BP largely has been "booted" from Ecuador and Venezuela, as well, though some of that was inspired by geopolitical reasons beyond the London-based company's control.

"If this was a one-off situation and they never had a problem before, that's one thing," he said of the Gulf spill. "But this is just the latest. It hasn't been a well-run company for a long time." Kuehl added that characterizing BP as a company operating in a cavalier manner on maintenance and safety "would be a very polite way of putting it."

Brian Shappell, NACM staff writer

Fed Study Finds Credit Availability Unchanged, Chairman Optimistic

A new Federal Reserve study finds that credit availability from U.S. financial institutions remained largely unchanged during the past quarter. Fed officials are trying to spin the findings as a positive sign that conditions are stabilizing and setting the stage for improvements in the not too distant future.

The Fed's April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices found most banks kept their lending standards unchanged overall during the quarter. Nearly 86% of banks did not change standards for large- and middle-market firms (those with annual sales exceeding $50 million) and 96.3% made no change for small businesses. Large banks, however, were found to be more likely to ease some of their lending policies. Meanwhile, the survey found a small percentage of banks actually began easing standards for commercial and industrial loans. It's the first time an increased number of firms eased their standards in two consecutive quarters since 2006.

However, a majority of domestic banks are carrying higher standards for credit applicants as well as tougher terms for approving small business credit card accounts, both for new and existing customers. Additionally, commercial real estate continues to take a beating. The Fed noted a "significant number" number of domestic banks tightened standards on commercial real estate loans, though not as much as in the previous study conducted in January. Some estimate a commercial real estate recovery may be delayed into 2012.

During the Chicago Fed's annual Conference on Bank Structure and Competition, Fed Chairman Ben Bernanke admitted credit availability remains limited, but promises there are reasons for optimism.

"Economic activity has continued to strengthen, and senior loan officers tell us that, at least outside of commercial real estate, they anticipate a modest reduction in their troubled loans over the coming year," said Bernanke. "As a result, bank attitudes toward lending may be shifting."

Bernanke noted that officials at the Fed's 12 regional districts are in the midst of an outreach program designed to discuss credit industry problems occurring on the ground and possible solutions to improve matters, especially for small businesses.

"Our message is a simple one: Institutions should strive to meet the needs of creditworthy borrowers, and the supervisory agencies should do all they can to help, not hinder those efforts," said Bernanke. "We are also supporting sensible efforts to work with troubled borrowers to bring them back into good standing."

Brian Shappell, NACM staff writer