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.
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."
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.
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
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.
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.
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.
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.
The Honorable Sam Graves
United States House Committee on Small Business
2361 Rayburn House Office Building (RHOB)
Washington, D.C. 20515
Dear Chairman Graves:
The National Association of Credit Management (NACM) has represented the interests of the nation's business trade creditors for more than a century. Since its formation in the late 19th century, advocating for the legislative needs of these businesses, who supply the lifeblood of the American business economy in the form of commercial credit, has been a cornerstone of NACM's mission. In this capacity, acting directly on behalf of our construction industry members, we write you today to offer our support to H.R. 776, the Security in Bonding Act, scheduled for markup in your Committee this week.
Commercial credit, collections and financial risk management professionals that work in the construction industry for subcontractors and materials suppliers comprise more than 50% of NACM's membership. These individuals manage the complex process of extending credit to other companies while navigating the numerous rules and requirements that govern how work is performed on, or materials are supplied to, a public or private project. Payment on these projects is often secured through the use of liens, bonds and Uniform Commercial Code (UCC) filings.
The Federal Reserve is asking for comments from the business community as part of its study on the perceived problems (and solutions) regarding electronic and other types of payment systems. Perceived problems include increased potential/risk for fraud, international transactions, timeliness of funds availability and efficiency gaps. If youâ€™d like to learn more about these topics, youâ€™ll find more details in the Federal Reserve report titled Payment System Improvementâ€“Public Consultation Paper.
As part of this effort, the Fed has created an online survey to assist it in learning about the problems and issues end users currently find problematic.
We encourage all credit professionals to complete this survey, which can be found at https://www.frbsurveys.org/se.ashx?s=3FD0ADC72EEBF8A1.
This online survey will be available through December 13. The Fed wants to learn what business credit professional currently find problematic, what needs to change and how the Fed can help. Itâ€™s exciting to know that NACM membership can assist the Federal Reserve in creating potential guidance or regulations that will steer the future of electronic payments.
Town Hall Meetings
Along with the online survey, another vital component of the process and way for NACM members to be heard is to attend any one of a series of Town Hall meetings the Fed will host to discuss the issue. NACM believes it is important that members attend these meetings to represent the B2B creditor segment of payment-systems end-users and illustrate the vast differences between business-to-consumer and B2B transactions.
We hope that you will help mobilize a group of members and attend meetings in your respective areas:
- November 12 1 p.m.- 4 p.m. (EST) Federal Reserve Bank of Atlanta
- November 13 1 p.m.- 4 p.m. (EST) Federal Reserve Bank of Cleveland
- November 14 8:30 a.m.- 11:30 a.m. (CST) Federal Reserve Bank of Chicago
- November 15 8:30 a.m.- 11:30 a.m. (PST) Federal Reserve Bank of San Francisco
- November 18 8:30 a.m.- 11:30 a.m. (EST) Federal Reserve Bank of Boston
- November 20 8:30 a.m.- 11:30 a.m. (CST) Federal Reserve Bank of Dallas
More information is available about each town hall meeting at this link.
Free Informative Teleconference
On November 5, Sean Rodriguez, senior vice president of industry relations for the Federal Reserve System, will discuss the main themes of the Fedâ€™s research to date during an NACM-hosted teleconference that is exclusive (and free) for members. He will also address questions and comments from NACM members on the issues raised in its published paper mentioned above. Click here for more information on the event.
The National Association of Credit Management (NACM) reiterated its opposition to Virginia House Bill 2198 this week as policymakers in the Commonwealth continue to consider the bill's ramifications ahead of the next legislative session in 2014.
Most recently the Virginia Small Business Commission received a preliminary report from an ad hoc committee formed specifically to study HB 2198. The committee requested that any other input from interested parties, such as NACM, be submitted to the committee by October 25. Once all this information is collected, it will be compiled into a final report from the committee after their next work group meeting on November 14, the results of which will be presented to the full Small Business Commission at their next meeting in December.
The Small Business Commission can then make a recommendation either in support of or in opposition to the bill, or it can offer no recommendation at all. However, the Commission's actions are not binding on the bill, and HB 2198 is expected to be part of the Virginia Legislature's agenda in the coming session.
NACM continues to oppose HB 2198 on the grounds that it would make it harder for commercial credit managers to get the information they need to make decisions on potential customers, and that the bill represents a fundamental misunderstanding about the way credit professionals use credit reports not as a reason to deny a company credit, but as a tool that lets them find out more about the customer so that they can find ways to sell to companies despite their adverse credit history.