The following is NACM's official response to an Associated Press article about credit and small businesses that ran in several mainstream media outlets last week.

Dear Associated Press Editors,

An AP article that ran in several news outlets, titled "How small businesses can avoid loan rejections" and written by AP small business reporter Joyce Rosenberg, had good intentions and a considerable amount of important information for small businesses seeking to improve their commercial credit standing. However, while it focused on the relationship between small businesses and their banks, it completely ignored the important relationship between small businesses and their suppliers. It is this relationship that defines the commercial credit score for all businesses.

Further, the article missed the fact that Dun & Bradstreet Credibility Corp. (DBCC), whose CEO provided all of the article's quotations, is a by-product of a greater problem regarding consumer and commercial credit. The problem, in short, is that not many people recognize the vast differences between how consumer credit and commercial credit are extended, as well as how consumer creditors and commercial creditors are assessed for creditworthiness.

Regrettably the article failed to note that DBCC's primary product is a credit monitoring service which is sold to businesses for a fee. It's a carbon copy of countless other credit monitoring services offered to consumers by credit bureaus, financial institutions and other companies. While both consumers and businesses can monitor their own credit reports and address discrepancies for free, what DBCC's business model represents is an attempt to take a consumer product, and apply it in a commercial setting.

The current version of a bill in the Virginia House of Delegates, HB 2198, would require commercial credit reporting agencies to identify their sources of "negative information" when they provide a copy of a report to its subject. This would mean that Virginia buyers would know the identities of the sellers that shared any of their negative payment history with a commercial credit reporting agency should they choose to dispute the information on their report.

However, according to the office of Delegate Michael Watson (R-James City/York Counties), the bill's chief patron, and other industry sources, an amendment to the bill that would eliminate this requirement is forthcoming. The text of such an amendment has yet to be made public.

Still, the bill would also require agencies to provide Virginia businesses access to a free annual credit report and would allow the subject of a commercial report to dispute parts of their report that they believe are inaccurate. After receiving the subject's complaint, the commercial credit reporting agency would have 30 days to either delete the statement or include a note in the report saying that the subject of the report has disputed a particular piece of information.

A deal was reached to ameliorate the effects of the United States going over the so-called "fiscal cliff" on January 1, but few seem satisfied with the legislation.

The bill, dubbed the American Taxpayer Relief Act of 2012, initially passed through the Senate in the early hours of 2013 by an overwhelming 89-8 vote. It faced a less certain future in the House of Representatives, but the bill eventually overcame a Republican party split to successfully emerge from the lower chamber in a 257-167 vote.

Even the legislation's supporters framed it as a stopgap measure that did what was necessary to neutralize the cliff's automatic spending cuts and tax increases, which took effect on January 1, but did little more than that. "There's more work to do to reduce our deficits, and I'm willing to do it," said President Barack Obama. "But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."

According to the Congressional Budget Office (CBO), the Act will reduce the country's deficit by $737 billion, mainly due to a tax increase on individuals earning more than $400,000 a year and households earning $450,000. While the bill also makes $107 billion worth of spending cuts, Republican leaders promised substantially greater reductions in the future, while trying to shift the blame to the White House when possible. "With the revenue piece settled, Washington must now turn to solving the rest of the fiscal cliff—the out-of-control spending that has led to record debt and deficits under President Obama," said House Ways and Means Committee Chairman Dave Camp (R-MI).

An American Bankruptcy Institute (ABI) Commission has found that the current Bankruptcy Code, enacted in 1978, is in need of modernization.

In a conference call this week, ABI examined the progress of their Commission to Study the Reform of Chapter 11 and discussed the ways in which the 1978 Code is outdated. Such issues were identified by practitioners and academics who participated in the five public hearings held by the Commission throughout 2012.

"The community recognizes that the Bankruptcy Code is strong and durable and works, but, as I've often said, it's somewhat like using a typewriter," said Commission Member Richard Levin of Cravath, Swaine & Moore LLP. "It could be improved, it could be more efficient and more balanced in many ways, while providing the kinds of protections that creditors and debtors alike need to preserve jobs and preserve value."

The U.S. Department of Justice's Trustee Program is expected to promulgate new disclosure rules this month for law firms regarding the fees they charge debtors in Chapter 11 bankruptcy cases.

Professional fees in these cases have ballooned in recent years, leaving many creditors wondering how debtors' attorneys can bill such exorbitant costs to firms that are already in financial straits. Among the rules expected to be proposed by the Trustee Program are provisions that would require firms to disclose rate increases and justify them as cases go on, as well as measures that require firms to prove that their rates are aligned with other members of their industry.

The actual debtor's cost for a Chapter 11 bankruptcy filing has long been criticized but was thrown into the public eye in the wake of the liquidation of Lehman Brothers. Court filings in March of this year revealed that the holding company paid a whopping $1.6 billion to lawyers, accountants, advisers and other professionals over the course of their case.

In a quicker-than-expected turnaround, the Supreme Court ruled unanimously to uphold the rights of secured creditors in Chapter 11 bankruptcy-related assets sales.

The high court noted that a Chapter 11 "cramdown" plan could not be confirmed if a secured lender, often a bank, is denied the right to use debt owed to them at an assets auction in lieu of cash. The timing comes as a surprise, as a decision was not expected for several weeks, as does the unanimous vote (with Justice Kennedy not taking part in the decision) since Chief Justice Roberts expressed the importance of "the specific over the general" when analyzing the debtors' point of view in a late April hearing of arguments regarding differing credit bidding decisions in the lower courts.

The Senate Judiciary Committee approved a bill last week that would aim to make it easier for small businesses to properly reorganize.

S. 2370, the Small Business Reorganization Efficiency and Clarity Act, was reported without amendment on a unanimous voice vote during an executive business meeting. As reported in last week's edition of NACM's eNews, in addition to imposing a number of interesting research requirements on various government agencies, the bill would also double the time by which a court must confirm a small business reorganization plan, from 45 to 90 days, and give courts the authority to compel a debtor to self-identify as a small business.

A reorganization process specifically designed for small businesses already exists within the Bankruptcy Code, but debtors can choose whether or not to use it, regardless of how small they are. S. 2370 gives courts the authority to dismiss a debtor's case for failing to identify itself as a small business debtor. NACM suggested such a change in its previous work with S. 2370 sponsor Senator Sheldon Whitehouse (D-RI).

In remarks made during the bill's markup, Whitehouse described S. 2370 as a modest group of agreed-upon amendments that gives courts and debtors more time to confirm a plan, while also eliminating "catch-all" reporting requirements that served no useful purposes. Cosponsor Senator Chuck Grassley (R-IA) and Senator Tom Coburn (R-OK) agreed with Whitehouse's characterization of the bill, with Coburn describing it as a good, common sense compromise.

The Senate is in recess until next week. It remains unclear when the full chamber might take up S. 2370, or if the House Judiciary Committee has any plans to take up a similar bill, or use the legislation as a vehicle for other related purposes.

Stay tuned to NACM's eNews for ongoing updates on this bill and NACM's other legislative priorities. If you have any questions or comments about NACM's Advocacy program, email Jacob Barron, CICP at jakeb@nacm.org.

- Jacob Barron, CICP, NACM staff writer

Monica Jackson
Office of the Executive Secretary
Bureau of Consumer Financial Protection
1700 G Street NW
Washington, DC 20006

RE: "Docket No. CFPB-2012-0005"

To whom it may concern:

The National Association of Credit Management (NACM) has, for more than a century, represented the interests of unsecured trade creditors across the nation. These are generally businesses that extend credit to other businesses, providing the American economy with the financing that keeps companies of all sizes running.

The proposed regulation is of concern to NACM because of the credit reporting and debt collection services which NACM affiliates provide to their members. These two markets are of great importance to the nation's economy and, specifically, the day-to-day activities of commercial trade creditors. Our nearly 20,000 members frequently rely on credit reports to judge a potential customer's creditworthiness, and also rely on debt collectors in order to assist them in the vital task of receiving payment for the goods and services that they've provided to a debtor. Some of NACM's 39 affiliates offer credit reporting and debt collection services to businesses that it would appear the CFPB now seeks to regulate.

The Senate approved H.R. 674 today, clearing the 3% withholding repeal bill's path to passage.

The bipartisan vote included measures to repeal the 3% tax, which would otherwise go into effect on most government contracts starting in 2013, and to enact a jobs plan that offers tax breaks to businesses that hire recently discharged veterans.

While the House must still approve the final bill before it can be signed into law, support remains strong, and full passage is likely.

NACM congratulates the Senate on approving this important legislation, and welcomes the imminent end of the 3% withholding tax, which NACM has opposed since its enactment.

Stay tuned to NACM's blog for more updates.

Jacob Barron, CICP, NACM staff writer

Senate Majority Leader Harry Reid (D-NV) planned today to attach a tax cut for businesses that hire veterans to H.R. 674, which, on its own, would repeal the 3% withholding tax.

The veterans jobs bill, dubbed the VOW to Hire Heroes Act, would provide a tax credit to businesses that hire unemployed veterans that were discharged in the last five years and provide an additional tax cut to companies that hire veterans with service-related disabilities. H.R. 674 would eliminate the imposition of a 3% withholding requirement on all government contracts starting in 2013, and pay for such a repeal with a readjustment to last year's Affordable Care Act, also known as "Obamacare" or simply the health care reform bill.

Each piece of legislation enjoys heavy support on a partisan basis; the veterans jobs bill is a democratic proposal and the 3% repeal a republican one. Support from each proposal's originating party is firm.

Ideologically speaking, the tax cut for businesses that hire veterans is firmly in the republican wheelhouse, but it's something that would, at least theoretically, increase the deficit, anathema to republican legislators swept into office by the Tea Party. Meanwhile, democratic support for a repeal of the 3% withholding tax has been strong, but several party members aren't wild about paying for it by taking a swipe at the party's signature legislative achievement.

Coupling these two bills together, each with its own partisan pedigree, could potentially give democrats more of a reason to support the 3% repeal, and republicans more of a reason to support the veterans jobs bill.

Only time will tell. The vote is scheduled for 5:30pm EST.

Stay tuned to NACM for more updates.

Jacob Barron, CICP, NACM staff writer