December 18, 2014
The US Supreme Court has confirmed it will consider whether an order denying confirmation of a bankruptcy plan is appealable.
The question stems from Louis B. Bullard v. Hyde Park Savings Bank, in which the US Court of Appeals for the First Circuit had determined a bankruptcy court's rejection of a repayment plan was a final judgment and thus not appealable. The petitioner owns property in Massachusetts, on which the bank holds the mortgage.
The case began December 14, 2010, when Bullard filed a voluntary petition for Chapter 13 bankruptcy. About a week later, he filed a payment plan, which he amended three times. His most recent plan proposes a hybrid-payment scheme that divides his debt into a secured claim, backed by property, and an unsecured claim, which represents the "under-water" portion of the mortgage. On July 24, 2012, the court rejected the plan, as proposed, because it found the design inconsistent with certain provisions of the bankruptcy code. The bankruptcy appellate panel affirmed the decision, ruling that the order denying confirmation of the plan was not a final ruling because Bullard could propose another plan.
Both Bullard and the bank have agreed that the case acknowledges a 6-3 circuit split with regard to whether such orders are appealable, which the Supreme Court should address. The First, Second, Sixth, Eighth, Ninth and 10th circuit courts "require debtors to propose plans they do not want or incur dismissal in order to obtain review," Bullardâ€™s petition states. The Third, Fourth and Fifth circuits allow debtors to appeal an order denying confirmation of their plan.
In Hyde Park Savings Bank's request for judicial review, the bank states, "The question presented herein is critical to the administration of bankruptcy proceedings in both the business and consumer context as corporate Chapter 11 plans are also implicated by this question. The granting of the petition for a writ of certiorari will end the split [among] the appellate circuits and ensure uniformity throughout the country as to whether an order denying confirmation of a bankruptcy plan is a final order that is appealable ... In the event that the court grants the petitionerâ€™s request for certiorari, the court should resolve this critical question by affirming the decision of the First Circuit and the majority of the other circuits that have considered this question."
- Diana Mota, NACM Associate Editor
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A studyâ€”one that saw robust participation from NACM members earlier this yearâ€” involving five of the nationâ€™s Federal Reserve Banks finds payments fraud, especially attempts involving credit cards, escalating as a concern for US businesses. Notably, nonfinancial services (non-FS) companies are less likely to report attempts than banks or other financial institutions even though a higher percentage of the former reported fraud-based losses in the last year, the Fed report illustrates.
The 2014 Payments Fraud Survey, spearheaded by the Federal Reserve Bank of Minneapolis, notes that non-FS respondents reported that the top priorities for fraud prevention are:
- Replacement of credit card magnetic strips with chip-based ones
- Better information sharing on emerging fraud tactics
- More aggressive law enforcement
The survey dovetails with current efforts to improve electronic payments domestically by the Fed's Remittance Coalition, of which NACM is a member, and identifies inadequate staffing as the biggest obstacle to reducing payment fraud. Though check usage still ranks first as the top payment type accepted in non-FS-based transactions, respondents reported that credit card fraud attempts stand out as the most frequent, by percentage, among incidents reported and the culprit for the highest losses. Although point-of-sale transactions, which apply to very few trade creditors, were the most common site of fraud scheme attempts, online use of counterfeit or stolen cards placed a close second. Both nearly doubled the third-most prevalent scheme attempted (counterfeit checks).
Notably, 67% of non-FS business that made key changes to risk management practices saw the percentage of losses decrease. Still, respondents voiced concern regarding the amount spent on fraud mitigation over the last two years, as it was often higher than estimated losses.
The 2014 version of the survey shows an increased commitment by the Fed to include non-FS industries in its studies. Since the last study in 2012, the share of non-FS companies, which includes trade creditors represented in the study, jumped to 44% of total respondents from 6%. Among non-FS groups, 17% reported an affiliation/membership with NACM, which marked the highest representation among all trade associations participating in the 2014 Fed study.
- Brian Shappell, CBA, CICP, NACM Managing Editor
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The countdown to the official shift in liability regarding credit card fraud from issuers to merchants in the United States ticked below 180 business days this week, an important reminder of the coming sea change. One expert in the credit card processing field told NACM this week that businesses that have not started planning for the changeover are unlikely to be operational with fully integrated chip-based technology by the October 2015 deadline. Those businesses processing mostly card-not-present business-to-business transactions, however, may not be pressing as hard as retailers and financial institutions to complete the conversion.
January marks the "year of enablement" for the changeover to chip-based credit card technology, which is also referred to widely as EMV (Europay, MasterCard, Visa), said Patty Walters, senior VP of corporate EMV strategy for payment processing solutions firm Vantiv. Chip-imbedded credit cards, considered much safer than magnetic strip-style cards, are already widely used in regions like Europe and are expected to grow exponentially for domestic use after liability for fraudulent activity is switched to merchants next year. Vantiv, which works with United TranzActions (an NACM partner) to provide credit card payment solutions, announced it would begin shipping chip-enabled cards to more than 200 banks and financial institutions during the first week of January. In November, Vantiv announced it was the first US acquirer to successfully complete an EMV-chip debit transaction using the Durbin compliant methodology dubbed "US Common AID."
"It has now been proven that it is possible for an issuer or their issuing processor to put Regulation II-compliant cards in the market and that a terminal acceptance processing environment will correctly authorize the transactions," Walters said. "That is a major touch point and proof that EMV can be implemented on debit by the largest market in the world."
It is notable, however, that chip-based cards will mostly address cards-present transactions, a miniscule percentage of trade credit payments. As such, card-not-present, B2B-specific vendors wonâ€™t be the biggest area of focus for the transition next year, although those with both B2B activity and retail locations are likely to be more involved, so full conversion can be completed for those companies simultaneously.
Walters noted that adoption in the B2B sphere gained saturation slower than the retail side previously, such as when Canada and the United Kingdom transitioned to chip-based cards. Thatâ€™s not to say B2B retailers should put conversion to chip-based card processing technology too far out of their minds.
"If you are a B2B participant, your risk for fraud may be lower than industry verticals like retail, supermarkets or petroleum," Walters said. "But I think at some point, EMV becomes a standard product feature. All segments of the industry will be on EMV down the road."
As for a tipping point for B2B on chip-based credit card processing, the October liability shift may not be it. However, fraudsters tend to migrate toward weak links. "We know from experience in other markets, that there is a point at which counterfeiters look at the portfolios, merchants and businesses that have not EMV-certified their infrastructures," said Walters. "The tipping point comes when the focus of counterfeiters manifests into an increase in fraud. That is the natural EMV migration cycle that occurs in all markets."
- Brian Shappell, CBA, CICP, NACM Managing Editor
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The usual suspects, mostly nations in Northern Europe, demonstrated the lowest levels of corruption in the 20th edition of a Transparency International study released this month, while the United States held relatively stable among the 20 best-performing nations.
"Economic growth is undermined and efforts to stop corruption fade when leaders and high-level officials abuse power to appropriate public funds for personal gain," said JosĂ© Ugaz, the chair of Berlin-based Transparency International. "Countries at the bottom need to adopt radical anti-corruption measures in favor of their people. Countries at the top of the index should make sure they don't export corrupt practices to underdeveloped countries."
The US placed 17â€”alongside Barbados, Hong Kong and Irelandâ€”with a score of 74 in the 2014 CPI, which measures the perceived levels of public sector corruption for 175 countries/territories worldwide. It advanced one point from 2013's score, which marked a two-position improvement in the rankings. No country earned a perfect score, and 69% scored below 50 on a scale from zero for highly corrupt to 100 for very clean.
The six best-performing countries were Denmark (92), New Zealand (91), Finland (89), Sweden (87), Norway (86) and Switzerland (86). The top three maintained their positions from last year. North Korea and Somalia finished at the bottom, both scoring an eight. Countries that lost the most points year-to-year were Turkey (-5), followed by Angola, China, Malawi and Rwanda (-4 each). Countries with the greatest point gains were CĂ´te d'Ivoire (Ivory Coast), Egypt, Saint Vincent and the Grenadines (+5 each). Afghanistan reported a strong gain (+4), yet it remained one of the five worst-ranked nations. Chinaâ€™s score fell to 36 despite its governmentâ€™s launch of an anti-corruption campaign targeting public officials, Transparency International said.
Regionally, the Americas had an average score of 45 with Canada placing first with 81 and Haiti and Venezuela last, each with 19. The EU and Western Europe averaged 66 with Denmark in the lead and Greece, Italy and Romania scoring the lowest with 43 each. Eastern Europe and Central Asia averaged 33 with Georgia scoring best at 52 and Turkmenistan worst at 17. The Middle East and North Africa averaged 38 with the United Arab Emirates at the top with 70 and Sudan at the bottom. The Asia Pacific's average score was 43 with aforementioned New Zealand and North Korea representing the respective high and low scores. Sub-Saharan Africa had an average score of 33 with Botswana at the top with 63 and Somalia at the bottom.
The anti-corruption group is urging the US, EU and G20 countries to follow Denmark's lead and create public registers that identify who really controls, or is the beneficial owner (or owners), of every company. "None of us would fly on planes that do not register passengers, yet we allow secret companies to conceal illegal activity," said Cobus de Swardt, Transparency International managing director. The director added that registers illustrate the true owner of a company and "would make it harder for the corrupt to take off with the spoils of their abuse of power."
- Diana Mota, NACM Associate Editor
For the full list of resultsâ€”with comparisons to 2013 and 2012, visit www.transparency.org/cpi2014/results.
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The "rules of the game" are changing economically heading into 2015, with the United States continuing a return to a position as a driver of world growth instead of a drag, while other powers languish in less positive territory, according to economists at Wells Fargo's Securities LLCâ€™s Economics Group.
The group's 2015 Economic Outlook predicts the US will grow at roughly 2.5% to 3% during the next two years, even though Wells Fargo Securities believes the Federal Reserve will begin raising rates by mid-2015. Such a GDP expansion rate, if projections prove accurate, would stand as the best two-year period since the recession. Though exporting has become an increased focus of US-based businesses and the Obama Administration, Wells Fargo economists believe the greatest lift, by far, will come from consumption-based spending.
"Much of the improvement will come from a stronger labor market as slack continues to diminish," the 2015 report notes. "Consumption will be bolstered by better household balance sheets, stronger income growth and lower retail gasoline prices."
Wells Fargo believes consumer confidence and spending will counteract a potential downturn in domestic business fixed investment, which is likely to decline as lower oil prices inspire reduced energy-related investments, and the drag on product demand, caused by global weakness. Regarding the latter, Wells Fargo predicts continued sluggishness in Europe and Japan and, though Chinese growth is expected to remain above 7%, that level is significantly short of previous years' rates. China's slowdown is especially problematic for export-dependent businesses and nations that have come to rely on growth tracking closer to double-digit levels. Wells Fargo economists noted industries of particular concern, from a US trade perspective, will be those tied to oil-field equipment, petroleum-based products and capital goods.
- Brian Shappell, CBA, CICP, NACM Managing Editor
To view video of Wells Fargo's 2015 Economic Outlook, visit NACM's Knowledge & Learning Center and scroll down to the Video Links section.
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