NACM Convenes Committee to Explore U.S. Bankruptcy Reform Recommendations

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NACM, as part of its ongoing Government Affairs Committee, has gathered a group of nearly a dozen elite trade credit professionals as part of a committee tasked specifically with setting a course for the association’s effort to push reform of Chapter 11 in 2015. The committee aims to establish a strong NACM legislative platform, which will be brought to Capitol Hill this year. Among Bankruptcy Code areas being reviewed by the NACM committee are preferences, Section 503(b)(9), venue provisions, creditors’ committees, executory contracts and provisions for very small businesses.

At present, no existing proposals for deep reform of the U.S. Bankruptcy Code carry real momentum in either house of the U.S. Congress. However, given that the current makeup of the U.S. Congress includes some committee leadership that has been amenable to pushing past changes considered fair and friendly to B2B creditors, bankruptcy reform will very likely find its way onto the radar of top federal lawmakers within the next year.

NACM Joins Groups Urging Individual Surety Reform in U.S. Code

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February 2015

The Honorable Anne Rung
Administrator for Federal Procurement Policy
Office of Management and Budget
Eisenhower Executive Office Building – Room 263
1650 Pennsylvania Avenue, NW
Washington, DC 20503

Dear Madam Administrator:

Pursuant to Sections 1302 and 1303 of Title 41, United States Code, we, on behalf of the members of the signatory associations, request that you initiate a modification to Part 28.203 (Acceptability of Individual Sureties) of the Federal Acquisition Regulation (FAR) to require that the assets pledged by an individual surety are real and readily available by requiring that such pledged assets meet the standards currently required by FAR Part 28.204.

The requirements of the Miller Act (41 USCA Section 3131 et seq) are designed to protect the interest of the federal contracting agencies, as stewards of taxpayer funds by requiring bid and performance bonds and the interests of subcontractors and suppliers by requiring payment bonds, which provide such downstream parties payment protection of last resort for work performed and supplies furnished.

The current coverage of the Government-wide Federal Acquisition Regulation (FAR) Subpart 28.2 (Sureties and Other Security for Bonds) provides the contracting officer guidance, but implementation can be compromised by the severe challenges faced by even the most seasoned construction contracting officer. A determined and unscrupulous individual surety can too readily pledge assets that provide only illusory or insufficient protection. The core challenge for the contracting officer relates to verifying the existence of and assessing the value of the assets being pledged by the individual surety in support of the surety bonds being furnished to the Government. Those assets deemed "acceptable" under FAR 28.203-2(b)(3) include stocks, bonds, and real property owned in fee simple. The contracting officer faces several challenges in determining if the "acceptable assets" actually exist and can be readily liquidated to pay valid claims against a payment bond.

NACM-National Joins NACM North Central in Supporting B2B Exemption For Unclaimed Property

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February 10, 2015

Charles A. Trost, Esq.
Waller Lansden Dortch & Davis, LLP
Nashville City Center
511 Union St., Suite 2700
Nashville, TN 37219-1760

Dear Mr. Trost,

I am writing to you and the Uniform Law Commission today on behalf of the National Association of Credit Management and its more than 15,000 members in the trade credit industry. I understand the Commission is redrafting the 1995 Uniform Unclaimed Property Act (UUPA) and that a business-to-business (B2B) exemption for business associations involved in the ordinary course of business is being reviewed.

Our association urges the Commission to offer guidance and clarification in the UUPA that states should indeed adopt a B2B exemption as part of the updated UUPA. This is deeply important because the 1995 Act does not specifically exempt such transactions and fewer than one-third of all U.S. states have such an exemption in place. It is problematic because so many businesses face a host on onerous and inconsistent unclaimed property regulations in the present landscape.

Check Out NACM's 2014 Issue Brief

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The latest edition of the National Association of Credit Management's (NACM's) Legislative Introduction and Position Brief contains its first ever section dedicated to improving the nation's payment protections for construction subcontractors and materials suppliers, as well as an expanded, updated section of the vital differences between consumer and commercial credit reporting. Check out the 2014 Edition here, or look for it in the June 2014 issue of Business Credit.

NACM-Supported Construction Bill Advances in House

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The House Judiciary Committee advanced a bill endorsed by the National Association of Credit Management (NACM) last week. The Security in Bonding Act (H.R. 776), which would require all sureties on federal construction projects to meet the same financial and actuarial requirements as "corporate sureties," will now be considered by the full House of Representatives after the Judiciary Committee reported the bill by a voice vote.

Upon its introduction by Rep. Richard Hanna (R-NY), H.R. 776 was referred to both the Judiciary Committee and the Small Business Committee. While action on the bill was deferred in the latter committee, the former body considered the legislation over the course of April, ultimately approving it for further consideration on the last day of the month.

"Current law allows prospective bidders to use individual sureties to obtain the bonds guaranteeing their performance. The law also permits individual sureties to support their bond with illiquid and risky collateral," said Judiciary Committee Chairman Bob Goodlatte (R-VA) after his committee's markup, referring to current surety policies on federal contracts as presently outlined under the Federal Acquisition Regulation (FAR). "As a result, there have been repeated instances where the federal government and subcontractors turn to individual sureties for a recovery only to find that the collateral simply does not exist. The Security in Bonding Act addresses this problem by requiring individual sureties to provide low-risk collateral to support their bonds."

California Credit Reporting Bill Removed from Committee Hearing Agenda

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A California Assemblyman's bill that would impose new regulations on commercial credit reporting agencies took a hit this week after the State Assembly Committee on Banking and Finance removed the bill from the agenda for an upcoming hearing.

AB 2564, introduced by Assemblyman Brian Nestande (R), was set to be considered by the Banking and Finance Committee at a legislative hearing on May 5, but the bill was scratched earlier this week. This doesn't mean that the bill itself is defeated, just that it will not be considered by the California State Assembly. Under the state's legislative procedures, the bill can be repurposed and reconsidered in the Senate under certain circumstances, but with that said, the Committee's decision to exclude the bill from the hearing agenda should be welcome news to opponents of the bill who feared that the legislation could pose a threat to the free flow of commercial credit information in California.

NACM Submits Letter Opposing California Commercial Credit Reporting Bill

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April 30, 2014

The Honorable Roger Dickinson
California State Assembly Committee on Banking and Finance
1020 N Street, Room 360B
Sacramento, CA 95814

The Honorable Travis Allen
Vice Chair
California State Assembly Committee on Banking and Finance
1020 N Street, Room 360B
Sacramento, CA 95814

Dear Chair Dickinson and Vice Chair Allen:

For more than a century, the National Association of Credit Management (NACM) has represented the interests of unsecured commercial trade creditors, on Capitol Hill and in state legislatures across the nation. Our association was founded on the belief in the necessity of the free and open exchange of commercial credit information to a vibrant, thriving business economy, and the belief that any piece of legislation that threatens that exchange similarly threatens economic growth.

AB 2564 is just such a piece of legislation. As currently drafted, the bill would create new uncertainties for commercial credit reporting agencies that would, ironically, be felt most acutely by the businesses (commercial entities) that AB 2564 aims to protect and will ultimately reduce the amount of information available on California businesses, posing irreparable harm to the ability of businesses based in the state to acquire the goods and services they need in order to function on credit.

NACM believes that by requiring a commercial credit reporting agency to reveal the source of a piece of information to the subject of a commercial credit report upon the subject's request, AB 2564 would lead to a vast reduction in the amount of data available on California businesses. Rather than risk being identified by a customer anytime they reported a piece of negative payment information, even if it was accurate, trade suppliers will simply stop reporting this data on all California businesses, making it harder for all companies, and particularly small businesses, to access trade credit. Anonymity has been, and should continue to be, a vital part of the commercial credit reporting process because it facilitates the exchange of information that makes commerce possible. Removing anonymity would lead fewer suppliers to report the payment behavior of their customers to credit agencies, making it easier for customers that have no intention of paying their bills to access trade credit, and preventing legitimate, trustworthy customers from building their credit since no one is willing to tell an agency about their good behavior.

Fed Asks NACM Members for Help in Fraud Study

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A collective of five Federal Reserve Banks is spearheading a study on the challenges of payment fraud through early May. Participation is requested from payments risk management professionals, including those in credit and finance, as well as compliance, risk management, treasury and audit departments. Specifically noting that credit professionals are an underrepresented group, the Fed hopes to see greater representation from NACM members in this online survey.

Representatives from the Federal Reserve Bank of Minnesota, which also heads the Remittance Coalition in which NACM is a member, believe that credit professionals in the B2B sphere could have an important impact in this survey if more participate in the online questionnaire. The survey is open now, through May 9, and is available here. The survey addresses the various payments-related fraud experiences of financial institutions and businesses.

California Considers New Commercial Credit Reporting Regulations

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A bill before the California State Assembly would impose new regulations on providers of commercial credit reports. Assembly Bill 2564, introduced earlier this year by Assemblyman Brian Nestande (R), was referred to the Committee on Banking and Finance last week and represents the most recent effort by a state legislature to extend consumer credit reporting regulations to their commercial credit counterparts.

AB 2564 closely resembles Virginia House Bill 2198, which Virginia's legislature considered over the course of 2013 before eventually abandoning it. Specifically, AB 2564 would:

(a) require a commercial credit reporting agency to furnish a source of information to the subject of a commercial credit report upon the request of a representative of a subject,

(b) require a printed copy of the report to be provided at no cost to the subject of a report,

(c) prohibit an agency, or a business affiliate of that agency, from assessing a fee upon the subject of a report in connection with ensuring the proper data is contained within the commercial credit report of the subject, and

(d) require an agency to endeavor to maintain the most accurate data possible regarding the subject of a report.

NACM Introduces New Construction Law Positions in 2014 Issue Brief

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For the first time ever, the latest edition of the National Association of Credit Management's (NACM's) Legislative Introduction and Position Brief contains a section dedicated to improving the nation's construction laws.

The section is posted below and focuses on H.R. 776, the Security in Bonding Act, which is currently under congressional consideration, and federal support for bonding requirements on projects funded under Public-Private Partnerships, or P3s. The new Brief also includes an updated section on the vital differences between consumer and commercial credit reporting, which will be posted next week.

Stay tuned for more on the 2014 Issue Brief, which will be printed in its entirety in the upcoming June edition of Business Credit.

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