NACM Submits Letter Opposing California Commercial Credit Reporting Bill

on .

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.

Errors on commercial credit reports are also exceedingly rare and every commercial credit reporting agency already possesses a means by which to correct any errors a subject company might find on its report. This means to correct any mistakes is available to the subject of a report for free and what's more, every agency has a profit interest in keeping their reports accurate, and most of them bend over backwards to ensure inaccuracies are addressed. No credit reporting agency would be in business for long if it didn't already see to the accuracy of its product, a requirement that AB 2564 unnecessarily codifies. Maintaining accurate data and correcting discrepancies, which all commercial reporting agencies already strive to do, ensures that the vital exchange of commercial credit and trade credit information is allowed to occur quickly and accurately, which ultimately benefits the entire nation's business economy.

Still, NACM understands that mistakes happen on credit reports and believes in the right of every business to correct inaccuracies, but these avenues are already available to any company with a credit report. NACM has been nothing if not a firm believer in accuracy in its own credit reports, built from data collected for the purpose of creating just such a report, as opposed to other entities that use data as both the basis of a commercial credit report and as a marketing tool. For the record, NACM and its Affiliates have never, and will never, use supplier-submitted historical payment data on their business customers for anything other than the reason it was shared: to paint a fair and accurate portrait of one company's creditworthiness. NACM believes that the use of this data as a marketing tool for credit monitoring services can only lead to greater regulation, like the reforms proposed in AB 2564, that would ultimately limit the amount of information available on commercial entities and hinder the exchange of commercial credit between businesses.

AB 2564, like similar bills that preceded it, is a solution in search of a problem, a bill that would create new regulatory issues for commercial credit agencies to the detriment of California businesses and the California economy. As such, NACM and the trade credit community urges you not to support the bill in its current form. We stand ready to aid in any effort that helps to facilitate the exchange of commercial credit information in order to allow California businesses to grow their companies and reduce fraud, and we look forward to working with you in the future to educate California companies about the importance of trade credit and trade credit information.


Robin Schauseil, CAE
NACM President


Chris Myers
NACM Chairman
President and CEO
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