Solid Recovery in the January Credit Managers' Index

NACM’s Credit Managers' Index (CMI) for January 2014, which is now available at (see links at bottom), rebounded to a surprisingly high level after a dismal 2013 finish. This now begs the question, which of the last three months is signaling the real trend? In December, there was a palpable gloom falling over the economy where the statistics were concerned. The January data dispels that mood a little.

All of the favorable factors improved in January, headlined by sales regaining some of its lost momentum and climbing back into the 60s as well as a surge in dollar collections. There was also a very significant jump in amount of credit extended, which is at its best level in many months.

The unfavorable factor index also provided some good news. The majority of the factors showed improvement, and some truly regained the momentum that had been building in the months prior to December. Accounts placed for collection and dollar amount beyond terms improved quite a bit, and there was similar uptick in disputes. The latter washed away worries at the end of the year that struggling companies would be pushed over the edge and would start to become a challenge from a collection point of view.

Data from January, like November, suggest the low reading to end 2012 was likely an anomaly. The February CMI will attract much attention as analysts seek to determine if there is a clear trend of positivity in play.

More coverage of the January CMI is available in this week’s eNews. For a full breakdown, which will be available by Friday morning (EST), view the complete CMI report for January 2014 online. CMI archives may also be viewed on NACM’s website.


State of the US-EU Trade Pact

After several years of President Barack Obama stumping for increased exporting activity and the importance of multilateral trade pacts, like one to expand what is already in place with Europe, the issues were barely addressed at this week’s “State of the Union” address before quickly and almost awkwardly segueing to other topics. Perhaps a column this week by NACM Economist Chris Kuehl, PhD, gives clues as to why.

The trade pact between the US and the EU is looking less and less likely all the time. There are new barriers appearing on almost a daily basis and precious little that could be termed “progress.”

The latest set of problems stems from the renewed demand for financial sector reform coming from the Europeans. They no longer want to deal with a pact that doesn’t include some tougher regulations on banks and other financial institutions. This has been strenuously resisted by the US Treasury Department, as it insists that these are not trade issues but regulatory concerns that need to be dealt with in some other forum. The Europeans are not impressed with the often vague rules that came out of the Dodd-Frank legislation and are concerned the effort risks a repeat of the 2008 disaster that plunged the world into full economic crisis.

The European objections focus on the sense that little was done to curtail the kind of high-risk behavior that characterized the pre-2008 financial period. The biggest banks are bigger than ever, and there seems little more oversight than there was in the past. Meanwhile, the smaller and community banks have come under much tighter scrutiny. Importantly, the Germans do not like the approach of the US system and want deeper bank reform on the table as these talks get more focused.

The talks are still in the very beginning phase, and that means that the majority of the commentary right now is positioning as opposed to solid proposals. Meanwhile, the French are trying to protect their cultural heritage, and the US is still watching out for attacks on its tech sector. Recent contentious issues don’t necessarily doom the talks, but there is no expectation that anything substantial will emerge this year or even next.

- Chris Kuehl, PhD, Armada Corporate Intelligence

Bernanke Ends Fed Reign with More Tapering

The Federal Reserve broke from its latest economic policy meeting announcing that it would continue in the direction laid out in recent months by its outgoing Chairman Ben Bernanke.

The Federal Open Market Committee surprised few by holding the federal funds rate at a range between 0% and 0.25%. It reiterated past statements by Bernanke, serving in his last meeting as Fed chairman, that this would continue so long as unemployment remains above 6.5% and inflationary pressures do not surge. Also expected was further stimulus tapering to the tune of $10 billion total dollars per month. The Fed will continue adding to holdings of mortgage-backed securities, but by $30 billion per month instead of $35. At the last meeting of 2013, it reduced the pace down from $40 billion. It also decreased purchases of longer-term Treasury securities from $40 billion per month to $35 billion, mirroring the $5 billion decline also enacted at its previous meeting. Those actions received an increasingly rare unanimous vote by FOMC members, including incoming Chair Janet Yellen.

In its statement, the FOMC also noted what it saw as recent positives (economic growth acceleration, overall labor market improvement, business fixed investment increases, stable inflation expectations) and negatives (housing recovery slowdown, fiscal policies that continue to restrain growth) within the overall economy.

- Brian Shappell, CBA, CICP, NACM staff writer

For coverage on how the Fed's tapering activity is negatively affecting emerging economies around the globe, check out this week's edition of eNews, available late Thursday afternoon (EST).

Arizona Could Simplify 20-Day Notice Filing Requirements with Computerized Registry

Arizona could soon follow in Utah's footsteps by replacing its existing 20-day preliminary notice filing procedures with a central registry system instead. Sources within Arizona's construction community have noted that a rough draft of a bill expected to be introduced in the 2014 legislative session included language that would have Arizona adopt a computerized registry system for providing 20-day notices. Currently, under Arizona state law, as a necessary prerequisite to the validity of any claim of lien, such notice must be provided, in writing, to "the owner or reputed owner, the original contractor or reputed contractor, the construction lender, if any, or reputed construction lender, if any, and the person with whom the claimant has contracted for the purchase of those items."

The push for a registry system is primarily being driven by title companies, according to Michael Holden of Holden Willits PLC in Phoenix. The registry could simplify these companies' efforts to mitigate existing liens when offering refinancing to the owner of a job after it's completed by giving them a central system where they can find all of the 20-day notices filed on a project and identify all potential lien claims on the property. However, a registry system could also benefit contractors and subcontractors by simplifying Arizona's notice filing requirements, which Holden noted have been very stringently interpreted by judiciary. "Over the last several years the courts have really strictly construed the requirements for notices," he said, adding that a registry "would be…a much, much simpler way to send 20-day notices, and it would eliminate a lot of the technical defenses too."

Learn more in the Newsmakers section of NACM's Secured Transaction Services (STS) and check back for updates on any changes to Arizona's lien statutes and filing requirements.

- Jacob Barron, CICP, NACM staff writer

State Supreme Court Ruling Coming Soon on Risk Transfers to Subs

An important ruling in Transtar Electric, Inc. v. A.E.M. Electric Services Corp.
on the issue of general contractors (GCs) using "pay-if-paid" clauses to sidestep lien rights and avoid paying subcontractors is expected to be handed down by the Supreme Court of Ohio by spring, sources in the state told NACM last week. Such a case is important to watch because, as NACM Secured Transaction Services' Chris Ring characterized it, such clauses are "a kissing cousin to a no lien contract" and an infringement on subcontractors' rights. It also underscores the importance of credit managers being privy to reading big-dollar contracts before they are signed.

On November 5, the state high court heard arguments in the case, in which Transtar wasn't paid for work provided on a swimming pool project at a Holiday Inn because the GC tried to invoke pay-if-paid language to avoid payment when the property owner faced insolvency. Though a trial court originally found in favor of A.E.M., an Ohio court of appeals saw the language as unfavorable and hinted that such a clause was unfair in its essence, reversing the decision. The December 2012 appeals decision noted "we find no language sufficient to clearly and unambiguously indicate that the parties intended to transfer the ultimate risk of nonpayment to the subcontractor." The decision also included criticism of pay-if-paid clauses for being generally "disfavored" as well as being banned or limited in a number of states. A state Supreme Court reversal to A.E.M.'s favor would potentially harm subs working in Ohio, not to mention serve as something that GCs from other states could try to use to support pay-if-paid attempts in their own areas. Supreme Court decisions in Ohio are usually released about five months after oral arguments are heard.

"A pay-if-paid contract does not strip away lien rights. However, it limits the ability of a payee to pursue legal action and obtain a judgment against the payer in the event of nonpayment," Ring said. Regardless of the outcome, it spotlights the need for credit managers to insist on reviewing large-dollar contracts before they are signed. "A credit manager that has the chance to assess the risk associated with the contract can give the sales rep options so they can try to negotiate things like pay-if-paid clauses out of the contract," Ring suggested. In this case, since Transtar's work in 2007, there have been no payments made and the case has been tied up in courts. If clauses similar to pay-if-paid were removed back then, this issue might have been long resolved.

- Brian Shappell, CBA, CICP, NACM staff writer

Kiev Starts to Descend into Chaos

The situation in the Ukraine has not improved one iota. The first deaths in Kiev-based protests, which began after Ukraine officials shunned a partnership with the European Union perceivable at the behest of Putin Russia, have been reported. Security forces have attacked demonstrators with lethal intent, and the western states have stepped up their attacks on the government of Victor Yanukovich. He is now starting to run out of options, as the Russian president is starting to try to distance himself from the crisis as long as the Winter Olympics in Sochi are just about underway.

The isolation of the country is becoming more apparent, and the economy is really feeling the pinch. That only inflames the situation more as many are blaming his regime for every manner of ill. The Russians want Ukraine to be close, but not a dependency. The currency is collapsing, and many companies are pulling out all their investments.

The European Union is now looking at sanctions and that leaves Putin as Yanukovich’s only ally, but it is at a time when Russia is more concerned with other issues. The terrorist threat to the Winter Games is intense, and Russia can’t spare much to look after events in Ukraine. There are even concerns that Ukrainian nationalists would stage an attack on Russia just to bring attention to what is happening in Ukraine. This is a mess that is spinning out of control far faster than any had anticipated, but the government has refused to talk to the protestors and has only met their demands with escalating violence.

- Chris Kuehl, PhD, Armada Corporate Intelligence

More Bullish Predictions for US Growth, Creditworthiness in 2014

Add the International Monetary Fund (IMF) and Coface to a growing list of those predicting big things economically for the United States this year.

IMF’s 2014 growth forecast for the US has been raised to 2.8%, marking an improvement from its forecast during the fourth quarter last year. IMF hinted that federal lawmakers getting (slightly) more work done, and on a timetable with reduced brinksmanship regarding matters like the budget, provided reason to believe domestic demand will rise steadily throughout the year. The IMF’s outlook for overall global growth also increased since October, but by a smaller amount, to 3.7% despite concerns about slowing growth and newfound volatility within the big emerging economies.

Meanwhile, Coface’s Country Risk Update noted that the US business climate and credit risk environments showed “considerable improvements” in recent months. Coface noted a number of strengths within corporate America from a credit standpoint: high levels of self-financing, record profitability, low debt and strong investment. Like the IMF and others late last year, Coface analysts were also encouraged by a break, however slight, in partisan rhetoric and legislative gridlock within the US capitol:

“Clearer budget and monetary policies and growth in household demand boost positive trends.”

- Brian Shappell, CBA, CICP, NACM staff writer

Country Risk Improvement Most Notable in Northern Europe, Sub-SaharanAfrica

Brand new analysis from global credit insurer Coface found particularly noteworthy business credit improvements in eight nations worldwide. All of them are located in Europe or, perhaps surprisingly, long-troubled Africa.

Perhaps least surprising were improvements in Germany and Austria, which both maintained an A2 risk rating, the second highest of seven possible Coface ratings, but moved to a positive outlook. Analysts noted Germany’s slight shift toward consumerism may help take pressure off of traditional exporting activity needs. Austria is prone to improve because of low insolvency levels and unemployment. Also moving into the positive outlook area is Latvia, which boasts a B risk rating, fifth among seven ratings Coface ratings levels.

On the backs of a diversified recovery that included heightened exports and booming confidence levels is improvement in Ireland. It was moved up from an A4 to an A3 risk rating, though it is no longer in the positive outlook territory to move above that level quickly.

Like Ireland, Ivory Coast moved up one notch (to a C) from the lowest level (D). While Kenya, Nigeria and Rwanda did not move up in January 2014 credit risk metrics, Coface did move all three into a positive outlook. The four African nations are “part of a new generation of countries characterized to resistance to external shock.” Still, each has a long way to go, with none earning a risk rating above a C…for now.

Coface was less enthused by growth prospects and credit stability within the still-debt-troubled European nations (France, Italy) as well as formerly hot emerging economies facing a proverbial glass ceiling based on infrastructure issues as well as volatile exchange rates in the run-up to major elections (India, Turkey, South Africa, Brazil).

- Brian Shappell, CBA, CICP, NACM staff writer

Company Tied to Destructive West Virginia Chemical Spill Files C-11

In a reminder that a company can go from relatively financial stable to hurdling towards insolvency rapidly because of an accident or disaster, the company tied to a chemical spill that affected the West Virginia water supply has filed for bankruptcy protection.

On Friday, Freedom Industries Inc. filed for Chapter 11 in U.S. Bankruptcy Court in Charleston, WV, a city among many communities affected by a tainted water supply following a spill discovered on January 9. Freedom officials tied the filing solely to expected lawsuits and liabilities that are undoubtedly facing the company. It is being blamed for a leak of the chemical methylcyclohexane methanol, which is used in coal processing operations and jet fuel production, into the Elk River. Hundreds of thousands were left for days without water for drinking or bathing, and more than 100 state residents were hospitalized within the first week since the incident. Payment demands from creditors and suppliers starting shortly after news broke of the chemical spill was reportedly listed in Freedom’s bankruptcy filing.

- Brian Shappell, CBA, CICP, NACM staff writer

Global Productivity Decline Continues at Slower Pace in 2013

2013 marked the third consecutive year of a global decline in productivity, according to a new report by the Conference Board.

However, the decline moderated significantly last year, as global labor productivity, measured as output per person employed, grew by 1.7% in 2013, down only 0.1% from the 1.8% growth in 2012. By comparison, 2012's figure marked a 0.8% decline from 2011's 2.6% growth rate, which itself was a 1.3% decline from the 3.9% rate of 2010. Since the emergence of large developing markets like India and China in the early 1990s, productivity growth has rarely fallen below 2%, with notable exceptions during the early and late 2000s recessions.

Conference Board Chief Economist Bart van Ark noted that the slowdown could be "largely due to the stabilization of productivity growth rates in mature economies," as growth in output per person employed in the US held steady at 0.9% in 2013 and output per hour grew only to 0.8% from 0.7% in 2012. In Europe, output per person employed jumped from 0.1% in 2012 to 0.5% in 2013, but fell on a per hour basis from 0.7% to 0.6%. Overall, productivity growth rates for most countries remained very low in 2013.

"Emerging markets, and especially China, account for the bulk of world's productivity growth," said Abdul Erumban, senior economist at the Conference Board and co-author of the report. "But the years of rapid, easy improvement appear to be over. Since these countries remain significantly less productive than mature economies in US dollar terms, the ongoing shift of economic activity away from the latter adds to the global productivity slowdown."

The report also includes a measure called total factor productivity, which accounts for productivity of labor and capital inputs in one measure. In 2013, this figure dropped below zero for the global economy. "This indicates stalling efficiency in the optimal allocation and use of resources," said Erumban. "While in part the result of slowing global demand in recent years, the drop in productive use of resources is also related to a combination of market rigidities and stagnating innovation in those economies."

- Jacob Barron, CICP, NACM staff writer

Germany Posts Worst Growth Year Since Financial Crisis

Regardless of who else rises or falls economically in the European Union, the focus almost always ends up on the bloc’s largest and most important economy, Germany. And the messages about the northern powerhouse seem to be mixed, at best, right now.

Germany, reported a 2.4% monthly increase in November’s industrial production statistics following three declines in the previous four months, according to Eurostat. Still, it significantly trailed monthly gains in Ireland, Sweden and Malta in statistics unveiled this week. Overall, the European Union’s industrial production increased by 1.8% in the EU-17 and 1.5% in the EU-28 categories, respectively. The pace in November was also 3% better than that of November 2012.

However, one day later, less positive news arrived: that Germany’s growth slipped from 2012’s lackluster 0.7% to 0.4% in 2013. It marks the worst performance since 2009, and at a time when the EU as a whole needs Germany to show the way to prosperity. While troubling, a majority of experts remain bullish on Germany, predicting growth rates exceeding 2% this year on the renewed strength of its primary export destinations. Also fueling cautious optimism was that German growth at least finished strong in the fourth quarter compared to the earlier portions of 2013. Either way, Germany obviously remains the quintessential economy to watch in the EU.

- Brian Shappell, CBA, CICP, NACM staff writer

Industries to Watch Flashback: Monday Casino Shutdown Far From Shocking

The number of casino operations in Atlantic City and among nearby cities newer to the industry have increasingly threatened the solvency of gaming operations operating in a precarious cash position, especially in the traditional New Jersey gambling hub. Midnight on Monday marked the first major shutdown associated with that very glut, which was outlined by NACM’s Industries to Watch feature last February.

The Atlantic Club Casino, a gaming and hotel property formerly owned by the Hilton family, shuttered its operations permanently after selling off pieces of its assets post-bankruptcy to companies like Tropicana and Caesar’s Entertainment. Neither plans to resurrect gaming at the location, which was the farthest property south among nearly a dozen casinos that dot the famous Atlantic City Boardwalk. The demand simply doesn’t necessitate more supply thanks not just to an ongoing slow rebound from last decade’s recession and financial crisis, but simply the presence of too many players in the game.

Atlantic City casinos and hotels have continued to lose market share, especially in the winter months, as several East Coast states within driving distance have legalized gambling. For example, there are now six fully operational casinos within a 5- to 10-minute drive off the stretch of Interstate 95 between Washington, DC and Philadelphia, with at least two more set to open within the next year.

Patrick Spargur, ICCE, credit & collections manager with Bally Technologies Inc., suggested in an interview last February that shutdowns, liquidation and/or restructures should not be seen as anomalies for those on involved in East Coast, especially Atlantic City, operations, but rather, perhaps as a sign of things to come as the market shakes out.

“Analysts I follow say, in Atlantic City alone, three to five properties need to be either shut down or converted into boutique hotels,” he noted last year. And the situation really hasn’t improved in significant fashion.

-  Brian Shappell, CBA, CICP, NACM staff writer

Five Reasons to Think That Corporate Spending Will Increase in 2014

There has been a consistent challenge over the last five years of what passes as an economic recovery from the global recession. The business community went into almost complete hibernation as the crisis began, and they have been compared to a startled turtle ever since. But there is now some evidence that this period of extreme caution may be ending, which would signal some real gains in the months to come.

  1. The first indication of improved corporate attitude is that there has been impressive growth in recent quarters. The unexpected rise to 4.1% in the third quarter GDP numbers would suggest that there was more going on than appeared to be the case at first blush. There has been more aggressive activity coming from the top of each industry. If these trends hold, there should be some more consistent growth.

  2. Consumers may be close to shifting back to their more traditional spending habits. The amount of credit card debt has started to rise again even though that wasn’t really evident in the holiday season.

  3. Corporate leaders seem to fear political interference less than in the past. This may prove to be an unrealistic position, but, for the moment, there is an expectation that politicians will be far too concerned with the upcoming election to be as troublesome as they have been in the past.

  4. There is more confidence in the recovery of some of the rest of the world. There may be widely divergent opinions about the ability of other parts of the world to make a significant comeback in 2014, but there is slightly more enthusiasm than has been the case in the last few years, notably in emerging Asia, Germany, Mexico and Columbia, among others.

  5. More corporate growth may come from the stock market. There is renewed market interest in those who seem to have an expansion plan.
- Chris Kuehl, PhD, Armada Corporate Intelligence

Auto Listed Among Least Risky Sectors in Credit In North America,Emerging Asia

New research from Coface indicates that, at least in the area of credit-granting, the energy and automotive sectors appear to represent the lowest risk among 14 major categories in North America. That is not the case in two other regions tracked.

The newfound US energy boom places in the “moderate risk” category, the lowest tracked by Coface’s “Panorama” publication. Also in the moderate risk was automotive, marking an improvement from the less-desirable “medium risk” territory it was in at last check with Coface. Economists working for the firm noted that auto sales have returned to pre-downturn numbers as consumers became increasingly less equipped to delay replacement of older cars and trucks with positive trends likely to continue.

Auto also tracked well, in the moderate risk category, in “Emerging Asia.” Also in the relatively safe category in that region were the pharmaceuticals, retrial, services and wood/paper sectors. Among the biggest concern there, as well as in North America and Western Europe, was the metals category. Metals was listed in the high risk or very high risk areas by Coface in all three, primarily because over-production out of China, among other Asian nations. This is creating a glut of supply, lowering prices and price stability in Asia while creating a huge competitive disadvantage for producers out of North America and Europe.

Western Europe had more than double the number of sectors in high risk or very high risk in the latest research period. Automotive and metals were among the riskiest, followed by sectors like chemicals, construction, electronics/IT, pharmaceuticals and wood/paper.

- Brian Shappell, CBA, CICP, NACM staff writer

Amended Virginia Credit Reporting Bill Introduced for 2014 LegislativeSession

An amended version of the Virginia commercial credit reporting bill was introduced in the Virginia General Assembly last week.

The previous bill, HB 2198, has since been abandoned after the Virginia Small Business Commission made no recommendation on the bill last December. On January 3, however, Delegate Christopher Head (R), a former co-patron of HB 2198, introduced HB 370 for consideration in the General Assembly's 2014 legislative session. While HB 2198 was clearly the inspiration for HB 370, the newest version of the legislation takes into account the concerns of NACM and some of the previous bill's other opponents and abandons some of HB 2198's most controversial provisions.

As introduced, HB 370 eliminates HB 2198's identification provisions, which would've required commercial credit reporting agencies to identify the source of so-called "negative information" to the subject of a commercial credit report. Instead, HB 370 boils HB 2198 down to two major provisions: one that requires commercial credit reporting agencies to provide the subject company a free copy of their commercial credit report, less any information that's deemed proprietary to the commercial credit reporting agency, and another that provides the subject of a report with further recourse to challenge an "inaccurate statement of fact" on their credit report after the subject has exhausted the commercial credit reporting agency’s standard means of dispute resolution.

The legislation still could have implications for the commercial credit reporting industry. Under the terms of the second half of HB 370, the representative of a subject company can, within 30 days of exhausting a commercial credit reporting agency's dispute resolution procedure, file a written summary statement with the reporting agency identifying the disputed information and indicating the nature of the disagreement. Within 30 days of receiving this summary, the reporting agency must either delete the item that is disputed or mark it in the report as being disputed.

Concerns linger about how this provision could potentially weaken the strength and value of commercial credit reports on Virginia businesses, and about the practicality of how commercial credit reporting agencies would go about deleting pieces of information or marking them as disputed in individual company credit reports. NACM will continue to review the legislation and work to ensure that no bill is enacted that could negatively affect the free and open exchange of credit information.

A summary of the bill can be found here, while the full text is available here. If you have any questions, please email NACM Government Affairs Liaison Jacob Barron, CICP at

- Jacob Barron, CICP, NACM staff writer

Will Obama Try to Cement Trade Deals?

This is a critical period for President Barack Obama regarding free trade agreements, so much so that it may determine whether his last two years are utterly wasted. Obama has stated his support for both the Trans Pacific Partnership and the new pact with the European Union, but there is a real question as to how much effort he is willing to put towards passage this year.

The US position on big trade deals appears to be a moderate, center one at present. That could be problematic. The majority of the Democratic Party seems to be shifting to the left, if the recent elections are any indication. The GOP has already shifted noticeably to the right. This all makes compromise very hard.

The left wing of the Democratic Party hates these deals with a passion and sees them as detrimental to the position of the worker in the US, even if facts strongly suggest otherwise. It is a guaranteed vote-getter in the communities these campaigning Democrats need. If the president backs the trade deals, he risks pushing some of his left-leaning supporters away. To back down risks compromising the growth of the US economy. But Obama, in the past, boasted better poll numbers, and there were more within the ranks of the Democrats who wanted his blessing.

Now the question is, with the attention shifting to who the Democratic standard bearer will be in the 2016 race, has Obama lost his ability to take his own party in a direction it doesn’t want to go.

- Chris Kuehl, PhD, Armada Corporate Intelligence

Retailers Appeal Visa-MasterCard Interchange Settlement

The world's largest retail trade association appealed the recent approval of a $5.7 billion antitrust settlement against Visa and MasterCard over interchange fees this week. As expected, the National Retail Federation (NRF) asked the 2nd U.S. Circuit Court of Appeals to overturn the lower court's ruling just three weeks after it was issued, opening the next chapter in the still raging battle between merchants and card networks over card processing costs.

U.S. District Judge John Gleeson approved the controversial settlement on December 13, 2013, ending a suit filed against Visa, MasterCard and several financial institutions in 2005 by merchants that alleged the card networks and banks had colluded to keep interchange, or "swipe," fees unreasonably high. Under the terms of the approved settlement, the defendants will pay merchants $5.7 billion in direct reimbursements and temporary interchange rate reductions and allow merchants to pass on their card processing costs via surcharge.

Merchants, and more specifically retailers, objected to the settlement on the grounds that the cost to Visa and MasterCard, which is still the largest antitrust settlement in U.S. history, was far too low considering the fact that Visa and MasterCard collect approximately $30 billion annually from interchange fees. They also objected to a provision of the settlement that bars merchants from ever bringing similar legal challenges against Visa and MasterCard, which, retailers argued, allows the two card processing giants to continue to set their interchange fees in secret.

"A majority of the original plaintiffs in the case repudiated the settlement as soon as they saw its terms, the nation’s largest retailers have spoken out against it, and close to 8,000 retailers and merchants have formally rejected the proposal. This is an abuse of the class action system and should never have been approved," said NRF Senior Vice President and General Counsel Mallory Duncan. "The only people pleased with this settlement are Visa and MasterCard, because it means they can continue collecting tens of billions of dollars in hidden fees, the class action lawyers who stand to collect half a billion dollars in fees without fixing the problem, and a lower court, which has cleared a time-consuming case off its docket, but has done a serious disservice to merchants and the public in the process."

In its appeal announcement, NRF also denounced the idea that surcharging was a viable solution to retailers and other merchants laboring under the high costs of card acceptance. "Instead of lowering fees, the card industry's settlement proposes that merchants pass them along to consumers in the form of surcharges," Duncan said. "That is absolutely the opposite of what the retailers sought, and major retailers have soundly rejected surcharging."

B2B sellers, however, have remained interested in surcharging ever since the practice was allowed 60 days after the settlement's preliminary approval. To learn more, check out the article titled "Just Too Early" on page 42 of the January 2014 edition of Business Credit.

- Jacob Barron, CICP, NACM staff writer

EU Welcomes Latvia to Start Year

Latvia became the 18th full member nation of the European Union and began using the euro on January 1. Granted, people in the Baltic nation have concerns, as do some of the more stable EU members that already paid to bail out problematic, fellow EU nations in recent years.

Though recovering well from the massive global recession that started to hit Europe particularly hard by 2008, some Latvians have consternation about joining an economic bloc that has seen several nations, especially in the southwestern portion of the continent, fall into financial hard times on the euro. The concern is so prevalent that polls indicate upwards of half the population did not want to switch currencies. That said, the potential for reduced reliance on the Russian government because of new alliances and a stable, well-accepted currency was high enough for leaders to push the move.

The progression is the opposite of that of Ukraine.Protests reignited this week in Ukraine as part of the fallout from the nation’s shocking move in late November to abruptly end trade pact negotiations with the EU after five years to, in theory, cozy up to Putin Russia. Passionate protests outside the capital this week show the populous is not ready to quietly accept a situation that gives Russia a perceived heightened control over Ukraine’s decision-makers.

- Brian Shappell, CBA, CICP, NACM staff writer