Credit Managers' Index Falls in July

The latest Credit Managers' Index (CMI), published by the National Association of Credit Management (NACM), showed a minor decline in July, led by a sharp drop in collections.

The "dollar collections" category hit one of the lowest readings of the past year—only three months in the last twelve were lower than in July, suggesting that there are some additional strains showing up within the creditor community. All of the other favorable factors declined, as did the overall favorable factor index.

News in the unfavorable category was more positive, but not by much, as the unfavorable index also fell in July. "Rejections of credit applications" and "filings for bankruptcies" were the only categories to improve, reinforcing the notion that there is still tolerance for risk in the credit community and "accounts placed for collection" remained essentially flat.

Despite the declines, the CMI mirrored many other pieces of recently released data that seem to show the economy slowing moderately. The July data suggest that growth has slowed, but not enough to plunge companies into full-blown crisis. "Given that the national data has been pointing towards a slowing economy this is not too shocking," said NACM Economist Chris Kuehl, PhD. "There are some clear areas of retreat, but just as important is the fact that there are some clear areas of growth and that provides some encouragement for the rest of the year."

A full copy of July's CMI report, complete with graphs and commentary, can be found here.


Virginia Small Business Commission Schedules New Hearing on Commercial Credit Reporting Bill

The Virginia Small Business Commission scheduled another meeting next month to discuss the future of House Bill 2198, which could affect the exchange of commercial credit information on businesses in the commonwealth.

According to the Commission's website, the next meeting will take place on August 29 in the General Assembly Building in Richmond, VA. While no agenda has been made available to the public as of yet, NACM has been in contact with Commission staff members who have made it clear that the meeting will consist of the HB 2198 workgroup, a gathering of proponents and opponents of the bill that was informally established at the Commission's last meeting at the end of June.

At that prior meeting, the Commission made no recommendation about whether or not to endorse or reject the legislation, instead urging both sides of the debate to work together on a more agreeable measure. NACM will attend the August hearing to ensure that the interests of unsecured trade credit grantors are considered by Virginia legislators.

NACM has opposed HB 2198 since its introduction and was on hand at the June meeting to make the case against the bill's identification provision. This measure would require commercial credit reporting agencies to make the source of a certain piece of information on a commercial credit report known to the subject of that report, if the information was considered "negative," a term the bill fails to define.

NACM will be monitoring the bill in all its forms throughout and opposing any legislation that could restrict the free and open exchange of credit information. If you have any questions or comments about HB 2198, please contact Jacob Barron, CICP at

-Jacob Barron, CICP, NACM staff writer

South Korea Continues Strong Growth Despite Threats

For several years, South Korea was considered just below the BRICS (Brazil, Russia, India, China, South Africa) nations on the list of emerging economies. South Korea showed continued strength with recent news of its best quarterly growth rate since early 2011, even as members of the BRICS bloc have watched significant growth rate and business condition declines.

The nation posted 1.1% growth for the second quarter, beating the results of last quarter, the second quarter of 2012 and analysts’ estimates. Confidence appears to be booming on other fronts, as well. A Wall Street Journal report found that business startups have nearly doubled over the last four years.

NACM Economist Chris Kuehl, PhD said the latest news out of South Korea "verges on the spectacular. The growth is the fastest seen in two years, and the reason for the surge is a rapid expansion of the consumer sector.” The expansion was particularly interesting given the turmoil with North Korea and easing growth in China, its biggest destination for exports, Kuehl said.

The Chinese growth issue is one that has many analysts, including those at Wells Fargo Securities LLC Economics Group, concerned about South Korean prospects beyond the short term. It noted Korean exports to China comprised more than 10% of its overall GDP. Other worries listed in a Wells Fargo report published late last week include the aging population that will result in a shrinking workforce as well as perceived advantages other countries, including China, have in the region when it comes to currency value.

-Brian Shappell, CBA, CICP, NACM staff writer

Hochberg-Led Ex-Im Bank Saved by Bipartisan Filibuster Deal

Senators struck a deal to stop the ongoing filibuster of President Barack Obama's executive branch nominees last week, cleared the way for Fred Hochberg's confirmation as chairman and president of the Export-Import Bank. Had the Senate not confirmed Hochberg by July 20, the bank would not have had a quorum to approve transactions, and therefore would not have been able to function as vibrantly as it has over the last several years.

Until last week, the Republican Senate minority had been holding up a number of President Obama's nominations for various agencies with the hope that by doing so they could extract concessions from the Senate Democratic majority. Among the most contentious targets of the filibuster was Obama's nomination of Richard Cordray to run the new Consumer Financial Protection Bureau (CFPB), an agency created by the Dodd-Frank Wall Street Reform Act whose very existence is anathema to GOP.

Republicans had hoped to trade approval of Cordray's nomination, among others, for drastic changes to agencies and laws they opposed, but Democrats wouldn't budge. Senate Majority Leader Harry Reid (D-NV) threatened to use the so-called "nuclear option" in order to allow nominees to be approved with a simple majority vote, rather than with the 60-vote threshold typically required by Senate procedure, but the bipartisan deal struck last week allows the GOP to continue filibustering future nominees, so long as they drop their filibuster on seven of the President's nominees, Cordray and Hochberg among them.

Hochberg's nomination wasn't nearly as controversial as Cordray's, as Ex-Im is a self-funding agency that remains far less noxious to the Republican Party than the CFPB, but its continued delay certainly posed a more imminent threat to the U.S. export economy. "Over the past four years, Ex-Im Bank's financing has supported nearly one million American jobs and helped thousands of small businesses expand their reach into international markets," Hochberg said upon his confirmation. "The Bank also delivered more than $1 billion to the U.S. Treasury during this period at no cost to American taxpayers."

- Jacob Barron, CICP, NACM staff writer

Surprisingly Positive News Emerges in EU Economic, Credit Studies

A pair of studies released this week found potential early signs of recovery in a beleaguered European Union that has been long-waiting for optimism.

A European Central Bank (ECB) study on bank-based credit lending found conditions may be easing. The Euro Area Bank Lending Survey for the second quarter noted the net percentage of banks tightening credit standards on businesses seeking loans did not grow over the last three months. ECB analysts noted that was a surprise. Additionally, banks’ perceptions of the risk of lending to EU-based companies have stabilized. even if at historical escalated levels.

Meanwhile, a survey by Markit, a global financial information services firm, found EU member nations at their collective best, from the standpoint of manufacturers, in 18 months. The Markit Flash Eurozone Purchasing Managers’ Index (PMI) reached 50.4 in July, up from 48.7 from June. Many market analysts characterized that as unexpected. Within the statistics, manufacturers reported the largest monthly increase since June 2011. Two of the best manufacturing rebounds were noted in Germany and France. Markit Chief Economist Chris Williamson called the overall reading “encouraging."

Markit also published PMI results for the United States this week that show a four-month high on the quickened pace of manufacturing sector growth.

- Brian Shappell, CBA, CICP, NACM staff writer
Note: See the extended version of this story in this week's edition of NACM eNews, available late Thursday afternoon (EST) at in the "Resources" section.

After Chapter 9 Filing, Detroit Looks More Like Greece than Ever

Detroit's financial struggles were no secret, nor were its 50/50 chances of filing a Chapter 9. Still, although some have covered the growing threat of cash-strapped municipalities for the last three years, Detroit's record $17 billion Chapter 9 case has suddenly shined a spotlight on this rarely exercised portion of the Bankruptcy Code, starting with media outlets and extending to the Administrative Office of the U.S. Courts, which, a day after Detroit filed, released a free guide on its website, simply titled, "When Cities Go Bankrupt."

The largest Chapter 9 filing in U.S. history has also thrown the similarities between Detroit and Greece into sharp relief. Both have been held up as the poster boys for post-recession municipal and sovereign debt struggles, but the journeys of both Motor City and the Hellenic Republic into the red are startlingly similar, and the road ahead equally dire.

"At some point in their history some truly stupid decisions were made and at some point in the last few years conditions changed that made what looked like a good move turn into a disaster," said NACM Economist Chris Kuehl, PhD, noting that, in Greece's case, it bought labor peace by offering more than it could afford to public sector workers and retirees. "The litany of giveaways is long and there was never a point where Greece could really afford them," he added.

Detroit made similar mistakes, based on a big assumption that's now proven itself tragically incorrect. "In order to buy time with the public sector workers, they were offered generous benefits in retirement in lieu of pay raises during their working careers," said Kuehl. "It was a bargain based on the assumption that the city would expand and make more money in the future. The city leaders went annexation crazy at one point and created a city with more land area than communities with three times the population."

Much as the reasons for their struggles are the same, the roads to solvency for both Detroit and Greece will need to involve a combination of taxation, investment and government intervention if they're to have any chance of success. "The taxation system will have to expand but with the realization that too much tax will drive people elsewhere. The investor has to be enticed to take a big risk and that drives up the cost of that loan—just look at the yield on Greek bonds," Kuehl noted. "The third leg is government bailout. That is what is taking place in Greece… Thus far there is no promise of rescue from the state of Michigan or from the U.S., but that position will have to change, and will once the city of Detroit makes the same adjustments and makes the same promises that Greece had to make."

Most depressingly among the many connections between Detroit and Greece is the fact that their renewal won't be paid for by the people who instituted these disastrous policies in the first place. "The people who will take the brunt of the assault are not the ones that made the bad decisions and behaved stupidly," said Kuehl. "It will be the hapless people who simply ended up living in these communities."

To learn more about the Chapter 9 process and the role it will play for other municipalities in the coming months and years, tune into NACM's teleconference, "Chapter 9—Coming to a Municipality Near You," led by Bruce Nathan, Esq. on October 7. Click here for more information.

- Jacob Barron, CICP, NACM staff writer

More Problems for the BRICS Countries

The BRICS (Brazil, Russia, India, China and late addition South Africa) countries were a dominant bloc of economic powerhouses not long ago. But, since 2012, many stumbles have been noted, including the recent Chinese growth rate slowdown, inflation and unrest in Brazil and Russia’s perceived corruption and near dictatorship under Vladimir Putin. Late last week brought more projections of instability in the business sectors of the remaining two BRICS nations.

A new study on India by the group Business Today-C fore found business confidence slumping to its lowest level in two-and-a-half years. Nearly half of the 500 CEOs and CFOs polled reported worsening conditions during the last quarter. And about 75% of businesses predicted the economy worsening in the coming quarter, with two-thirds predicting it would likely look overseas for investment opportunities soon.  

Meanwhile, the Republic of South Africa was assailed again by Moody’s Investors Service. The ratings agency affirmed its Baa1 assessment of South Africa’s government debt ratings and maintained a negative ratings outlook. It explained the negative outlook by citing:

  1. “Continued sociopolitical pressures on the macroeconomic policy framework headed into next year's parliamentary election against a backdrop of slow growth; and

  2. The weakened outlook for the mining sector, which is the country's largest single employer and main source of foreign exchange earnings.”

Moody’s also notably raised the credit outlook for the United States’ Aaa rating on its deficit reduction measures and returning economic growth late last week. It had, like Standards & Poor’s, reduced the U.S. outlook last year but, unlike S&P, did not reduce the prestigious Aaa rating at the time.

-Brian Shappell, CBA, CICP, NACM staff writer

Bankruptcy Roundup: Detroit Becomes Largest C-9 Bankruptcy in U.S. History

(Breaking Update) Judgment day came for the City of Detroit as a municipal bankruptcy petition was officially filed after months of speculation that escalated in recent days.

Speculation about an filing considering "imminent" spread like wildfire this week that Detroit would file for Chapter 9 protection via its Emergency Manager Kevyn Orr, a bankruptcy specialist brought in earlier this year to handle the city's growing debt woes. Orr made it known that he planned to file if a large portion of the city's long-term debt, estimated at a range between $15-17 billion, couldn't be renegotiated with various creditors. Some, but not all, was. He estimated it at a 50-50 chance early this summer that Detroit would eventually file under Chapter 9.

This likely explains the timing behind a lawsuit aimed at the city, Orr and state Gov. Rick Snyder. The General Retirement System of the City of Detroit and Police and Fire Retirement System of the City of Detroit initiated a civil action less a day earlier against the three parties, perhaps trying to force more negoitations. The suit challenges the authority of Orr and the governor to authorize proceedings “that would in any way impair the accrued financial benefits of the Retirement Systems’ plan participants and beneficiaries.” The suit notes such benefits are protected by a 1963 article of the state constitution.

“The recent statements regarding an imminent bankruptcy filing prompted the Retirement Systems to take more immediate action,” said Ron King, the attorney representing the groups. Bruce Nathan, Esq., of Lowenstein Sandler LLP, has been following Chapter 9 developments throughout the country for nearly two years and has predicted that a major city filing out of a place like Detroit could potentially raise the profile of filing under Chapter 9, if not inspire a spike in filings not seen before.

Meanwhile, across the country, a California judge in the already filed case in San Bernardino has warned both sides that she will not look fondly upon continued gamesmanship (calls for delays, weak/vague challenges, etc.) in the coming weeks. U.S. District Court Judge Meredith Jury reiterated that she has no plans to waiver on moving forward with the scheduled hearing regarding the city’s Chapter 9 eligibility on Aug. 28. San Bernardino officials filed a summary judgment motion last week, just more than 11 months since its filing, claiming it has met all requirements mandated for a Chapter 9 filing.

A previous city news release noted “systemic” financial problems that would languish and that “clearly, reductions to the expenditures side of the budget are not going to product the level of savings that will be needed to balance the budget.” The budget shortfall was estimated at $46 million at the time of filing.

Both municipalities, like many U.S. cities struggling with heaping debt, are having problems tied to expensive contracts with current and retired public workers, especially for pension and health care costs that are zapping its budget. There are also noted problems involving shrinking tax rolls (San Bernardino from a deep real estate bust, Detroit from a quickly shrinking population mixed with high crime levels and unemployment) and their effects on resources.

-Brian Shappell, CBA, CICP, NACM staff writer

Cash Flow Stats Suggest Coming Economic Slowdown

A report on cash flow trends from the Georgia Tech Financial Analysis Lab indicated a decline in company revenue growth and free cash. Taken together, the data could be the earliest signals of an economic slowdown in the U.S.

The lab, led by NACM Graduate School of Credit and Financial Management (GSCFM) Instructor and Georgia Tech Accounting Professor Charles Mulford, examines cash flow trends and the underlying drivers causing changes in those trends. The resulting quarterly report, drawn from a total sample of 2,904 companies with a market capitalization of at least $50 million, found that, in the 12 months ending in March, the free cash margin index declined to 4.52% from 4.76% for the 12 months ending the quarter prior. For comparison's sake, the index hit a low of 3.96% in December 2008, during the throes of the recession. Its recent high water mark was 7.18% in March 2010.

Perhaps more alarming than the drop in the free cash margin are declines in revenue growth, the first in seven quarters and the declining profitability that seems to be driving the drop in the free cash margin. This quarter's report also hosted the first decline in capital spending after 11 consecutive quarters of rising capital expenditures.  

- Jacob Barron, CICP, NACM staff writer
See the extended version of this story in this week's edition of NACM eNews, available late Thursday afternoon (EST) at

Production Up, But is it Enough?

Federal Reserve statistics unveiled Tuesday indicate industrial production increased in June following a stagnant May. However, only a few industries really have room for celebration.

The Fed noted industrial production saw a 0.3% uptick last month and, for the quarter, saw an annual rate increase of 0.6%. Total production on a year-over-year level, was up 2%, and remains short of the average in 2007, when the economy started its well-documented fall into recession.

Within the numbers consumer goods flipped from a slight decrease in May to an increase in June (0.5%). However, this area seemed to be carried somewhat by bigger gains in automotive products (1.4%) and consumer electronics (2.2%). The Fed index tracking business equipment production rose 0.5% after slight decreases in the previous two months. Non-durable goods appear to be slumping, according to the Fed research.

In short, while a badly needed gain was noted, the statistics provided an all too familiar murky picture: one where growth is only slightly better than anemic, yet one that does not foreshadow another slide into recession territory.

-Brian Shappell, CBA, CICP, NACM staff writer

Commercial Bankruptcies Way Down in First Half of 2013, As Expected

Commercial bankruptcies have been on a steep decline all year, and the latest figures have continued to bear this out. There were 23,471 total commercial filings for the first six months of 2013, marking a 25% decrease from the 31,088 filings during the same period in 2012. Commercial Chapter 11 filings also fell to 3,445 in the first half of 2013, representing a 16% decline from the 4,120 commercial Chapter 11s filed during the same period last year.

Sustained low interest rates have created what American Bankruptcy Institute (ABI) Executive Director Samuel Gerdano referred to as "a new normal of reduced bankruptcies, as consumers and businesses continue to deleverage in a sustained low-interest-rate environment." Gerdano also noted that ABI expects this trend to continue for the remainder of 2013.

Last month alone there were 3,458 commercial filings, representing a steep 26% decrease from the 4,677 filings during June 2012. Chapter 11s also saw a drop in June 2013, though not as deep as commercial filings overall, falling 9% from 547 filings in June 2012 to 496 last month.

Low bankruptcy figures have been rough on bankruptcy law firms, and while the downward trend is expected to continue, it won't continue forever. As the Fed has noted time and again, once the job market recovers, it will consider raising interest rates in order to reduce inflationary pressure. Such an increase, however minor, could spur a new wave of bankruptcies among troubled consumers and businesses.

- Jacob Barron, CICP

'New Cold War' Not Good for Business, Credit Stability

The U.S. and Russia have not developed the relationship that some had hoped for when the USSR collapsed.Russia has staked out diplomatic and military positions that are polar opposites of those adopted by the U.S., and the sides are in conflict over Syria, Iran, Venezuela, North Korea and other matters.

There have been accusations that Russia is manipulating energy markets and metal markets. And there is almost no pretense these days when it comes to the country’s oil and gas holdings.

The U.S. business community continues to be engaged in Russia, which will likely never cease despite the difficulties. This is too large a market to ignore, yet too complex to make sense of it. The experience of those who do business in Russia usually falls into one extreme or the other. It is either the best and most loyal customer one has ever had or the biggest nightmare imaginable. It all comes down to the relationship and knowing one's customer since it has essentially been established that Russian laws are not reliable. The legal system serves the state and, if one runs afoul of the modern Czar-like Vladimir Putin regime, there is no safety in the legal community for creditors. Remember: these are the same Russian courts that just convicted an attorney seen as a Putin enemy who has been dead for four years and died amid controversial circumstances while in the custody of Russian law enforcement.

All told, the U.S. government now routinely advises the American business community to exercise great caution when doing business in Russia, as it will not be able to help if there is trouble with a Russian customer. The symbolism of democracy has all but been abandoned. The secret police are as powerful and ubiquitous as they ever were, and those who cause trouble for the regime seem to routinely vanish. The level of corruption is very high and institutionalized. The state now controls and owns most of the major industry in the country, and the authorities routinely exploit the private sector. In short, the "Red Mafia" is alive and well and has become essentially part of the system.

Very few analysts see anything but further deterioration in the relationship. A “hot war” is not likely, but the war by proxy is on … and expanding.

-Armada Corporate Intelligence

Industries to Watch: Small and Mid-Market Newspapers

As the shift of newspaper readers toward media websites rather than print copies continues, the use of pay walls for content access is gaining traction with more and more newspaper companies, especially among the big players. While this may work with the big guys--granted, it will take time to retrain a consumer base that has been given free access to news coverage by the vast majority of outlets trying to have the first “scoop” posted for more than a decade now--smaller entities will struggle in this new online pay model.

NACM Graduate School of Credit and Financial Management instructor Mohan Subramaniam, MBA, DBA, of the Carroll School of Management at Boston College, said the reasons for such concern revolve around resources, or a lack thereof, to invest in such new technology and, perhaps more importantly, to convince enough readers to pay for access. Remember: many small and mid-market newspapers rely heavily on upstart journalists fresh out of college, not marketable writers with national-level creditability. “You need something special now, in that industry like access to big name, star writers and columnists like Dan Shaughnessy or Paul Krugman…something exclusive,” Subramaniam said. “Small papers can’t get involved in this. It’s very scary to invest in the model if you are small because you don’t have the reach to attract those big names or even the big advertisers needed for a pay service.”

As for the long-held belief that smaller newspapers provide the localized stories the big fish have little interest in, those stories can now be found with increasing regularity by community bloggers, even if levels of creditability can vary.

Subramaniam warned those supplying to such companies to investigate the availability of their debtors’ financials in the industry and to start looking at their ratios and things like working capital as many of these smaller newspaper company "will die."

- Brian Shappell, CBA, CICP, NACM staff writer

Note: Extended version of this story will be available in this week's edition of NACM eNews, available late Thursday afternoon at

Interchange Fight Update: Lawsuits Galore, as More States Consider Surcharging Bans

Retailers and card networks have gone tit-for-tat on lawsuits lately in the ongoing fight over credit card interchange fees.

First, in mid-June, Visa filed a case against Wal-Mart in order to essentially bind them to the terms of the $7.25 billion antitrust settlement between retailers and Visa and MasterCard still being negotiated in federal court in the southern district of New York. In its complaint, Visa aimed to bar the world's largest retailer, one of nearly 8,000 that have already opted out of the previous settlement, from filing future price-fixing claims against Visa for how they set the interchange, or "swipe," fees that merchants pay whenever a customer pays by credit card. Incidentally, a provision that would keep companies that are party to the settlement from engaging in just that sort of behavior is one of the major sticking points driving merchant opposition to the proposal.

In its complaint, Visa said that it filed the suit to prevent "the continuation of endless, wasteful litigation between the parties," and that the company "seeks finality in its dispute with Wal-Mart." Under the terms of the still-pending settlement, retailers that opt out can file their own lawsuits over the interchange fees. Visa has argued that Wal-Mart "has made plain" that it will do so, but Wal-Mart has only publicly said that they're still evaluating whether to file their own suit.

If Wal-Mart did exercise its rights under that provision of the settlement, it certainly wouldn't be the first to do so. More recently, just before the end of June, a group of around 30 retailers, including Amazon and 7-Eleven, filed their own lawsuit against Visa and MasterCard, rejecting the agreement for, again, the fact that its penalties are too low and the fact that it grants Visa and MasterCard far too much freedom to raise interchange rates in the future.

"Once Visa and MasterCard acquired substantial market power over merchants, they maintained it by forcing merchants to pay even higher interchange fees to continue to fund these price-fixing schemes," said the retailers in their complaint. Other similarly-minded groups have already filed their own lawsuits, including CVS Pharmacy, and another group led by Target and Macy's.

While this drama plays out on the national stage, at the state level several legislatures are moving to ban surcharging altogether, meaning merchants will be unable to pass on their credit card processing fees to their customers located in the states where these measures are enacted. So far, the 11 states with surcharge bans are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas and Utah, which enacted a limited year-long ban in April that applies only to transactions of $10,000 or less.

The push for this type of legislation is being driven directly by the debate between retailers and the payment industry over who has to pay card processing costs. In addition to the aforementioned 11 states that already ban surcharging, now nearly 20 additional states are considering new, similar legislation governing payment cards and interchange fees.

- Jacob Barron, CICP, NACM staff writer

Business Conditions in Germany Previewing Darker Times Amid EU, China Slowdowns?

As German leadership contends with a political public relations nightmare amid reports that the Merkel government was complicit if not helpful regarding the U.S. National Security Agency’s widely reported spying tactics – which have caused the French to ask for EU-U.S. trade talks to be halted as more information is sought – news, overshadowed as it may be, on the business and credit fronts also appears less than stellar.

Statistics for May indicate German business’ exporting levels dropped by nearly 2.5%, marking the biggest dip in three-and-a-half-years. Some experts point out a silver lining in that the increase in imports means German consumer demand is high. However, the subsequent and troubling question revolves around how long such consumer behavior will last if domestic businesses begin to struggle to sell products abroad as the EU and China each face slowing growth rates and, as a result, supplying creditors start getting paid in a timely fashion less frequently.

Meanwhile, one industry that certainly doesn’t need anything resembling contagion from greater EU debt problems worsening or even a slight dip in demand is that of solar power products manufacturing. Germany has been one of the foremost countries in championing solar power and companies producing components that make it possible. However, similar to the situation in the United States, supply on the part of manufacturers is out of line with demand in an industry known worldwide for deep slowdowns during times of overall weak economic growth at home or with major trade partners. In addition, as Germany tightens its fiscal belt because of problems of EU partners, mostly to the southeast, officials announced plans to drastically cut subsidies to solar energy producers for the power they generate within five years.

Between these issues and the reality that Asian producers are selling products and services at much cheaper prices amid allegations of deeper and often illegal levels of subsidy from governments there, it certainly places German solar energy components manufacturers in an “Industries to Watch” category. It’s a topic on which creditors dealing with any customers that are in the solar industry or largely dependent on a customer in it, need to be paying close attention.

-Brian Shappell, CBA, CICP, NACM staff writer

Tough Week on U.S. Trade Front

The week marking the Independence Day holiday was not particularly kind to the United States on the trade front, as the nation found itself again facing a widening import-export gap as well as new calls to delay a new pact with the European Union.

Earlier this week, statistics indicated the U.S. trade deficit increased by more the 12% to $45 billion in May. The month’s total marks the biggest deficit logged in 2013 on an increase in imports within categories such as automobiles, smart phones and fuel-related products. Imports stopped just short of breaking a record at $232.1 billion, up nearly 2% from the previous mark, though that could mean the positive of increased consumer spending. However, experts were disappointed that exports slumped on lessoned demand from key partners, notably in the debt-sacked EU.

Speaking of the EU, negotiations for the Transatlantic Trade and Investment Partnership (TTIP) negotiations, designed to address already low bars on the high amount of trade between the two sides, hit a snag because of non-business policy out of the U.S. French officials are calling on fellow EU members to delay the start of any negotiations as part of fallout from revelations that the U.S. National Security Administration was spying on its own citizens and newer allegations that it conducted surveillance operations on EU members. Granted, the move could be rooted somewhat in the perception that France was already not particularly enthused about new easing of trade restrictions between the U.S. and EU through such a pact since talk of reopening negotiations erupted.

The TTIP has quickly become one of the President's top trade priorities since it was addressed during this year’s State of the Union address. Less than two months earlier, FCIB Global Conferences speaker Carlos Montoulieu, of the U.S. Department of Commerce, told NACM that the administration was working hard on multiple multi-lateral trade pact because they were more feasible to attain than bilateral deals and that there was already “a lot of momentum” behind deals involving a group of trade partners.  

-Brian Shappell, CBA, CICP, NACM staff writer

FACTA Class Action Suit Offers Cautionary Tale on Customer Receipt Data

Among the many measures included in the Fair and Accurate Credit Transactions Act (FACTA) upon its enactment in 2003 was a line that required businesses to truncate credit and debit card numbers on customer receipts. Now, almost seven years after FACTA lawsuits went out of style, a class action case has been filed alleging noncompliance with the law, this time over a seemingly minute, but potentially devastating misread on the part of one major company. Attorney Thomas Zimmerman filed suit earlier this year in the District Court for the Northern District of Illinois in the case of Mario Aliano and Nguyen Buren, individually, and on behalf of all other similarly situated v. Airgas USA, LLC and Airgas, Inc.

Specifically, the suit alleges that the plaintiffs received, from Airgas, a "computer-generated cash register receipt which displayed the last four digits of the plaintiff's credit card number as well as the card's expiration date." This sounds fine at first, but the relevant section in FACTA provides that "no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction."

So, while FACTA required card number truncation, it also provided that a business could only include those last few digits of the card number or the card's expiration date, but it couldn't include both of them.

If they haven't already, all companies should check to make sure that their receipts are being printed according to every letter of FACTA's terms. Though the class action suit is ongoing, even without proof of loss, credit card and debit card users can, according to statute, recover damages in an amount not less than $100 and not more than $1,000 for each act of willful noncompliance. These damages under FACTA are not capped, so a retailer could be liable for up to $1,000 per transaction even without any proof of loss by the customer.

- Jacob Barron, CICP, NACM staff writer

UCC Code Changes Now Effective in 37 States, DC

A number of changes regarding the Uniform Commercial Code Article 9 have gone into effect in the vast majority of U.S. states.

First proposed in 2010, the changes have been adopted by 37 states and the District of Columbia. They were crafted to clarify vagaries existing in UCC mandates caused by a lack of uniformity in the language of various state laws. NACM’s Secured Transaction Services Directory Gregory Powelson noted the changes should provide better protection to creditors who choose to use UCC filings to become secured while also streamlining the process of perfecting a UCC-1 filing.

Amendments to UCC-9 include the following:

  • Debtor’s name: Amendments provide greater guidance regarding the debtor’s name that must be used on a financing statement. The amendment on that topic offers two alternatives regarding naming: either providing the name on the debtor’s unexpired driver’s license or, as noted in the previous UCC mandate, using the debtor’s “individual,” birth-given name.

  • After Acquired Property: Perfected security interests in after-acquired property arising within four months after a debtor relocates or assumes collateral will remain perfected as long as a filing is made in the debtor’s new jurisdiction within the four months.

  • Information Statements: Secured parties now have the right to file an “information statement” if they believe a filing (termination statement, etc.) has been wrongfully submitted. This notifies third parties of a dispute.

  • Technical Amendments: Regarding financing statements, some information will no longer be required. This includes type of organization, jurisdiction of organization and organizational identification number of the debtor.

Powelson noted most state will continue to accept the old financing statements thru July, after that only the new financings statements will be accepted and oddly Wyoming will begin to cycle their financing statement on 10 years renewals vs. the otherwise standard 5 years.  Three holdouts – Alabama, Oklahoma and Vermont – will not be adopting the Article 9 amendments in 2013, according to STS. Adoption remains pending in 10 more (AL, AZ, CA, ME, MA, MO, NJ, NY, PA, SC).  

-Brian Shappell, CBA, CICP, NACM staff writer
More information on NACM’s Secured Transaction Services, including Mechanic’s Lien and Bonds as well as UCC filing offerings, can be obtained by clicking here.