April 19, 2012
As the recession took hold a few years back, fraud attempts surged. And some studies, like one released last week by Prolexic Security Engineering & Response Team, found that attempts still are continuing at alarming rates. The Prolexic study noted a massive jump in attempted attacks against its financial services clients during Q4 2011 and Q1 2012. However, that doesn't appear to be as much the case in the area of direct corporate payments and credit.
A March study conducted by the Association for Financial Professionals (AFP) found attempts at and successful fraud against both large and small corporate firms declined from peak levels in 2011. The study noted the lack of success in fraud attempts causing significant financial losses was because companies "took measures to mitigate exposures...and eliminated vulnerability."
AFP President/CEO Jim Kaitz noted checks remain the most vulnerable area to fraudulent behavior among payment types and said that, despite the drop from peak activity, corporate payment systems are still "prime targets." To the contrary, United TranzActions President Dean Middleton said his firm could not substantiate any talk of high fraud risk in 2012 as "our particular book of business has seen quite a decrease in fraud, frankly."
"We don't see any kind of uptick right now, even in our ACH world," Middleton said. "Our traffic seems to be incredibly clean. We're not even seeing near as many attempts. I think a lot of the dead fish that used to play games over the last few years have gone on to a different type of crime because everybody in credit got tight and started working smarter and harder. You have to know economic downturns turn hardworking people, people that don't want to be bad but are concerned about eating, into crooks. So, we all dialed up our defenses."
Middleton also noted that technological advancements have helped tremendously and will continue to do so as businesses increasingly seek secured online services for credit, collections and other financial transactions. It's all about speed and efficiency.
"The more and more that businesses engage in electronic processing, it is going to be a tremendous benefit in risk reduction, just because of the extreme increase of speed in being made aware of an issue, if nothing else." said Middleton. "When you facilitate electronic transactions, you're getting rid of mail and any of its delays. It speeds up the entire banking process. Before we introduced ACH, it was 10 to 12 days before the right people would find out about an NSF (non-sufficient funds), start to react to it and correct it. Now, the worst case scenario is three days."
Brian Shappell, CBA, NACM staff writer
New Lien and Bond Course Available in Credit Learning Center
Construction-oriented credit professionals understand the value of knowing the basics of the lien and bond process.
In "Liens and Bonds: The Critical Nature of the Preliminary Notice," the newest module in NACM's Credit Learning Center, the preliminary notice is stripped down to its basic components. This module addresses the when, why and how the preliminary notice relates to retaining lien rights, while leveraging receivables down the ladder of supply. From state-to-state nuances through timeframes and required elements, this must-view module will get you started down the right path.
Click here for more information about this course and the Credit Learning Center.
NACM submitted a comment this week on a proposal put forth by the Consumer Financial Protection Bureau (CFPB) pertaining to debt collection and consumer credit reporting.
The CFPB was given authority by the Dodd-Frank Financial Reform Act of 2010 to regulate non-bank "larger participants" that conduct business in several different sectors. This most recent proposal aims to define what constitutes a "larger participant" in the consumer debt collection and consumer credit reporting industries.
While NACM represents the interests of commercial, rather than consumer, creditors and credit professionals, the reality is that lawmakers and regulators frequently fail to distinguish between commercial credit activity and its consumer counterpart. "Congress and the federal government have repeatedly failed to make the distinction between these activities," said NACM in its comment. "Despite the vast differences between the two, commercial credit activities are often swept in with consumer credit activities, or overlooked altogether."
"Neither option is acceptable," said NACM. "Either trade creditors are forced to comply with costly regulations that are designed to regulate activity that is fundamentally different than their own, or they're forced to wonder whether or not they're included within the reach of any particular bill or regulation, leading many to consult the often expensive counsel of a lawyer."
NACM has therefore made educating lawmakers and rulemaking agencies part of its mission, and sought to do so with this submitted comment. Furthermore, many of NACM's affiliates offer products and services similar to those that the CFPB now seeks to regulate, only in a commercial, rather than consumer form. As limited as the bureau's proposal might be, NACM submitted the comment to pro-actively prevent the creation of rules and regulations that might inadvertently jeopardize the exchange of business credit information and availability of commercial debt collection services.
A full copy of the letter can be found here.
Jacob Barron, CICP, NACM staff writer
Earn Recognition, Respect and a Lifetime Designation in 13 Weeks
REGISTRATION DEADLINE: May 8, 2012
FCIB's International Credit & Risk Management Online Coursesm, leading to the prestigious lifetime Certified International Credit Professional (CICP) designation, begins May 13, 2012.
In 13 weeks, complete this comprehensive course that drills down to the core of international credit and risk management. From senior-level executives to entry-level professionals, this course is unparalleled for professional development, career advancement and peer-to-peer interaction which will help you build, diversify and strengthen a reliable network of professionals.
Last chance to register for the upcoming course is May 8th and SPACES ARE FILLING UP FAST! To learn more about the International Credit & Risk Management Online Coursesm, please click here.
The Supreme Court of the United States will hear arguments Monday in one of the few cases this year directly related to creditors and bankruptcy. The decision, expected to follow next week's hearing by a couple of months, will go a long way to clearing up unwanted uncertainty regarding the use of credit bidding during bankruptcy-related assets auctions.
The federal justices will weigh RadLAX Gateway Hotel LLC v. Amalgamated Bank in the chambers of the high court. At stake is whether secured creditors will be able to use the value of money owed by the debtor selling assets at the auction table when the sale is part of the reorganization plan as opposed to straight cash, a process called credit bidding, as the U.S. Bankruptcy Court for the Seventh Circuit ruled in RadLAX. However, that view is competing with contrary decisions out of the U.S. Bankruptcy Courts for the Third and Fifth Districts, which preceded it and would limit credit bidding if widely adopted.
One camp of credit experts and attorneys believes that credit bidding within an auction process helps facilitate other bidding, thus driving up the price and providing a bigger pot for creditors—unsecured and secured alike—to draw from at plan confirmation time. However, there's the flip side that believes if too much is owed to a secured creditor, it essentially freezes out outside bidders and those with lower standing and can discourage a "robust" auction process.
What seems to be agreed upon is that conflicting judgments, even if from respected bankruptcy courts, are not good for anyone in the process. Lynnette Warman, Esq., of Hunton and Williams LLP, and Wanda Borges, Esq., of Borges and Associates LLC, noted a degree of uncertainty will exist without the decision expected this summer and that's never a positive thing financially for credit-grantors or seekers.
"I think it will be very helpful," Borges said of the eventual ruling. "We have a split decision, and we need to put this to rest."
Warman believes the case could hinge on which justices take a particular interest in the case and who is responsible for writing the opinion on behalf of the high court. Still, neither side of the credit bidding argument can claim to be the prohibitive favorite going into arguments, especially with the Supreme Court's history on bankruptcy-related rulings.
"The court has not always been consistent in its decisions with its respect to the Bankruptcy Code," Warman noted.
NACM will be present at the RadLAX hearing and will post coverage following the Monday event on the NACM blog.
Brian Shappell, CBA, NACM staff writer
Credit Bidding Goes to Washington
The May legal issue of Business Credit features a discussion on the implications and predictions of the outcome of the Supreme Court decision in RadLAX Gateway Hotel LLC v. Amalgamated Bank. Look for the this issue, coming soon. NACM members can also read the flip-through version here, once available.
In addition, Warman and Borges, who contributed to the above story, will be among key speakers presenting at the 2012 Credit Congress in Grapevine, TX from June 10-13. For more information or to register, visit http://creditcongress.nacm.org/.
The U.S.-Colombia free trade agreement (FTA) will enter into force next month, far sooner than many initially expected.
During the Summit of the Americas in Colombia this past weekend, President Barack Obama announced that the FTA will take effect on May 15, allowing more than 80% of U.S. exports of consumer and industrial products to enter Colombia duty free. Additionally, more than half of U.S. exports of agricultural commodities to Colombia will become duty-free, including wheat, barley, soybeans, high-quality beef, bacon and almost all fruit and vegetable products.
The ahead-of-schedule effective date comes as a result of quick work on the part of both nations to review each other's laws and regulations related to the agreement's implementation. "This agreement will provide American businesses, farmers and ranchers with significantly improved access to the third largest economy in South America," said U.S. Trade Ambassador Ron Kirk. "That means support for well-paying jobs at home."
The agreement will also provide significant new access to Colombia's $180 billion services market, supporting increased opportunities for U.S. service providers.
Congress approved FTAs with Panama, Colombia and South Korea last October after a lengthy delay. While the Colombia FTA's entrance into force is cause for celebration among trade observers and the Obama Administration, U.S. trade relations with the country, and the region at large, could remain strained due to the fact that approval was so long in the making. "The Latin states are still angry that it took so long to pass the FTA between the U.S. and Colombia and that with Panama," said NACM Economist Chris Kuehl, PhD. "The pact with Colombia was held up by those who had issues with the human rights record of...[former Colombian President Álvaro] Uribe. Given the welcome the U.S. gives Chinese trade, it seemed the height of hypocrisy to take Colombia to task."
"In general, the nations in Latin America object to the tariffs and trade restrictions that have been in place for years," he added.
Panama's FTA remains the only one awaiting its full implementation, as officials have yet to establish an effective date. South Korea's FTA entered into force on March 15.
Jacob Barron, NACM staff writer
For more information on how to grow your company through international trade, visit FCIB's website at www.fcibglobal.com.
Distressed Business Services
Many NACM Affiliates are involved in a national network to provide assistance in the rehabilitation (if possible) or liquidation (if necessary) of businesses in severe financial difficulty.
While courts can take several months or more to start a reorganization plan, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Most helpful is the knowledge that experienced professionals are ready to step in at the most difficult time. NACM Affiliate staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.
Click here to learn more about NACM's Distressed Business Services.
The struggles among United States-based manufacturers of solar power-related products have been well documented as at least one significant company in the industry has filed for bankruptcy protection just about every month since last fall amid stiff competition and wavering domestic consumer demand. And now, news out of Germany looks grim as the Frankfurt-based First Solar announced it would shutter a domestic plant and "idle" four production lines in Malaysia amid the acknowledging that "the European market has deteriorated to the extent that our operations there are no longer economically sustainable."
However, India is pressing on with its alternative/renewable energy generation, and solar energy appears to be playing a big part. Demand for solar products developed largely in the U.S., Germany, China as well as other smaller Asian nations has skyrocketed in recent years as India tries to keep up with energy resource needs imposed by its surging population and development. To wit, the Jawaharlal Nehru National Solar Mission aims to expand the solar capacity within the country to 20,000 megawatts by the end of this decade, which would translate into the generation of 7% of all energy used within India coming via solar sources.
The latest high-profile Indian solar project, dubbed the "Rajasthan Sun Technique Energy Private Limited" has brought the Indian government and developers together with Reliance Power, a U.S. subsidiary with French ownership, as well as institutional investments from other parts of Asia and the Netherlands. Despite its reauthorization beyond this year becoming a political football in the U.S. Congress, the Export-Import Bank of the United States (Ex-Im) approved an $80 million loan to go toward the purchase of products for the project from manufacturing hubs based in eight U.S. states and the District of Columbia. It is the seventh loan venture on an India-based solar project involving Ex-Im.
Brian Shappell, CBA, NACM staff writer
Best-in-Class Service from NACM's Mechanic's Lien and Bond Services (MLBS)
MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.
MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.
For more information on NACM's MLBS, click here.
A majority of respondents to a recent American Bankruptcy Institute (ABI) poll argued that companies should be allowed to liquidate under Chapter 11 of the Bankruptcy Code.
Typically, Chapter 7 is the form of bankruptcy most often employed by debtors seeking to liquidate their assets, whereas Chapter 11 is most commonly used by companies hoping to reorganize and restructure their existing debt. According to the ABI poll, 70% of respondents—63% "strongly" and 7% "somewhat"—disagreed that "liquidating Chapter 11 plans" should be prohibited and that conversion to Chapter 7 should be the only option for a business case to end in liquidation.
Companies often use Chapter 11 to liquidate assets because management remains in place during the bankruptcy process. Some experts argue that this process results in a more orderly liquidation that increases the ultimate return to creditors, while other experts argue in favor of using Chapter 7 to liquidate instead.
Conversely, in a Chapter 7 case, a business ceases operations and is liquidated by a court-appointed trustee. Only 25% of respondents—12% "strongly" and 13% "somewhat"—thought that the only option to businesses looking to liquidate should be through Chapter 7 of the Bankruptcy Code.
Chapter 11 has, in recent years, been the subject of much debate by policymakers and bankruptcy observers. Supporters of the process argue that Chapter 11 offers an effective way for companies of all sizes to restructure their debt and emerge as a going concern. Others, however, argue that Chapter 11 is too costly for small companies and leads them to liquidation. Evidence can be found to support either point of view.
To learn more about NACM's positions on the U.S. Bankruptcy Code, read over NACM's Issue Brief, available here.
Jacob Barron, CICP, NACM staff writer
Do You Have It? Introducing the "NEW" Manual of Credit and Commercial Laws—2012 Edition
Now in four separate volumes to meet your specific needs. Buy whatever volumes you need, or get the complete set at a significant savings!
NACM has re-envisioned and revitalized the Manual of Credit and Commercial Laws. Not only will the new edition continue to provide essential information for credit and finance professionals, it will do so in a highly flexible and more affordable format. In its new form, the Manual of Credit now comprises four volumes that either may purchased separately or as a comprehensive set. Chapters and appendices from the book have been reorganized under the following headings:
• Volume I: General Business Law, Related Statutes and Collections
• Volume II: Commercial and Consumer Credit Topics
• Volume III: Construction Issues
• Volume IV: Bankruptcy and Insolvency Issues
Many sections within the chapters have also been reworked, including those covering cellphone-based collection efforts, FTC rulemaking in terms of decedent estates and data security/breach initiatives at the federal government level.
Click here to visit NACM's online Bookstore for Manual features and updates, and more information about the wide array of resources available to today's credit professionals.
To view past eNews issues or to visit the NACM Archives, click here.