June 19, 2014
NACM's 118th Annual Credit Congress and Exposition concluded last week, wrapping up a program defined by a selection of rich educational sessions and unparalleled networking opportunities for members of the commercial credit and financial risk management profession.
After the June 8 Grand Opening Reception in the Expo Hall, where attendees had the first of several opportunities to meet with the industry's top vendors and cutting-edge service providers, the 2014 Credit Congress hosted its annual General Session on Monday, officially kicking off the conference's educational program. The session also featured NACM's Honors & Awards Program, recognizing excellence among those credit professionals who go the extra mile for their companies and for their fellow professionals.
Among the most notable presentations of the morning was the O.D. Glaus Executive of Distinction, one of NACM's highest honors, which was awarded to Gary Gaudette, CCE, ICCE. Ever humble, Gaudette said he was "amazed" that someone would think to nominate him. "For me, this is a huge honor. I think an award like this is validation that youâ€™re trying to do the right thing in your career," Gaudette said. "I hope Iâ€™ve helped people and maybe inspired some people I work with and have informally mentored."
The General Session also included a presentation by former ATF investigator, CEO of the Body Language Institute, international trainer, speaker and author Janine Driver that was laugh-out-loud hilarious, startlingly eye-opening and deeply personal. "I think credit managers are one of the most undervalued people at any company," Driver said. "You're the front line; you're the relationship line from our companies. It's you guys that make the difference."
The remainder of the program bore that out as attendees made the most out of a Credit Congress program that contained the greatest number of educational sessions of any Credit Congress, ever. They honed their ability to protect their companies by learning how to get and use financial statements, how cybertracking techniques can enhance collection activity and everything in between.
This year's conference also gave Credit Congress attendees a first glimpse into the work of the American Bankruptcy Institute (ABI) Commission to Study the Reform of Chapter 11, which provided the trade credit community with a status report rich with insight. The Federal Reserve also presented, for the first time to date, some of the initial findings of their Financial Services Division's ongoing attempt to reshape the nation's payment systems to better accommodate users. Findings indicated that businesses overwhelmingly believe the US needs to evolve in its payments systemsâ€¦and fast.
NACM thanks all of this year's sponsors and attendees for making the 118th Annual Credit Congress such a success! Look to NACM's publications for more coverage about the 2014 Credit Congress throughout the year.
- Jacob Barron, CICP and Brian Shappell, CBA, CICP, NACM staff writers
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NACM's annual Graduate School of Credit and Financial Management (GSCFM) returned to Dartmouth College this week. While dozens of credit and finance professionals continued to flock to the traditional advanced-level, executive education programs, 2014 marked the beginning of an elite, one-week program dedicated to global business: the Graduate School of Credit and Financial Management International (GSCFMI).
"I was excited to see it, just because thereâ€™s so much that's new in that area," said Donna Foy, CCE, ICCE of ADS, Inc. Early in the GSCFMI program, the focus was on international compliance. It's just not good business anymore to be compliant with various international business mandates as an exporter; it's also a necessity to avoid regulatory actions, including those from the federal government.
"Enforcement of export controls is an increasing priority for the US government," said speaker Lizbeth Rodriguez-Johnson of the firm Holland & Hart LLP. She added that fines are occurring more frequently and can be quite expensive if in violation of the lists of denied, unverified parties or foreign sanctions evaders or selling to an end-user with ties to known terrorist groups, among other offenses.
Rodriguez-Johnson said that, at a bare minimum, a trade compliance program at oneâ€™s workplace should include export responsibilities, screening of prohibited parties and countries, detailed recordkeeping, recurring training and a safety valve of procedures to self-report violations. Reporting on oneâ€™s self might seem counterintuitive, but the damages and penalties levied are typically much worse if the US government finds it first.
Harry "Skip" Brandon, who cofounded the risk and investigations firm Smith Brandon International, also placed emphasis on compliance programs. He, like Rodriguez-Johnson, noted the importance of compliance and company ethics but, also, the fact that many do not put enough into such programs as global trade credit continues its dramatic growth. "These programs give your decision makers and credit managers the ability to evaluate whether you want to do busness with them. Are they who they say they are? Can they do what they say they can? Your decision makers get information from a compliance program that allows good decisions," said Brandon. He added that due diligence is the cornerstone to making a compliance program a successful part of the credit and sales function.
The international program, which continues through Friday, drew heavily from previous Certified Credit Executive designation holders and GSCFM alumni for its student body. "I came back because you can't stop learning," said Hypertherm, Inc.'s Gary Gaudette, CCE, ICCE, the 2014 O.D. Glaus Credit Executive of Distinction award winner (see story #1)and NACM-National chairman elect. "There's always so much to learn, especially about international. Plus, the people you meet here, with their different experiences, you can pick up so much from how they deal with their problems. It really makes you think."
- Brian Shappell, CBA, CICP, NACM staff writer
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The state of Mississippi sued credit reporting agency Experian this week, accusing the firm of knowingly including erroneous data in millions of consumer credit profiles.
Mississippi Attorney General Jim Hood, a democrat, originally filed the complaint against Experian Information Services in a state court last month, but the case was only moved to the US District Court for the Southern District of Mississippi in Jackson last week. Specifically, Hood alleges that Experian's failure to provide a straightforward way to correct a consumer's credit report and their inclusion of incorrect information jeopardized the consumerâ€™s ability to obtain loans and possibly cost them employment by creating false red flags on background checks and government security clearances.
Hood also accuses Experian of using customer complaints to sell subscriptions to credit monitoring services, stating in his complaint that Experian will either reflexively find in favor of the creditor when a consumer disputes a piece of information or direct the consumer to a monitoring product instead of addressing the discrepancy. "Experian has turned its failures to maintain accurate credit reports and its refusal to investigate consumer disputes into a business opportunity," Hood said in a statement. Experian, for its part, has stated that it believes the lawsuit is not based in fact and designed to be sensational, and the company will defend itself against Hood's allegations.
What the suit alleges is similar to behavior allegedly seen in the commercial credit reporting arena within the last year or two. Commercial credit reporting agency Dun & Bradstreet (D&B) and its subsidiary monitoring service, Dun & Bradstreet Credibility Corp. (DBCC), were the subject of numerous complaints in several states by small companies who said that when they called to dispute supposed errors on their commercial credit reports, they were directed to salespeople promoting the monitoring service. As reported in the March issue of Business Credit, these allegations led to the filing of a class action lawsuit against D&B, alleging that they orchestrated a scheme whereby negative information was falsified on a company's credit report, and then that subject company was contacted by DBCC telemarketers who pressured them into subscribing to their credit monitoring service.
The Experian case is Mississippi v. Experian Information Solutions Inc., and numbered 14-cv-00243. While the suit appears to only apply to consumer credit reports, NACM will continue to monitor any developments in the case for their impact on commercial creditors. As stated in its 2014 Legislative Introduction and Issue Brief, NACM does not, and will never, use any of the information and trade data it receives to create a commercial credit report for any marketing purpose, nor for any purpose other than to facilitate the extension of credit between businesses.
- Jacob Barron, CICP, NACM staff writer
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International credit insurer Coface has updated its global growth forecasts with far more upgrades than downgrades and an outlook that includes an escalation of the overall world economic rebound for both this year and next.
Coface's latest country risk publication, Panorama, indicated global growth topped out at 2.6% in 2013. The firm predicted 3% growth this year and an acceleration by several additional percentage points in 2015. Key to the positive forecast is the return of some semblance of stability in European nations like Germany, Austria, the United Kingdom and long-lagging Spain. Germany and Spain represent departures from usual behaviour as well. Germany's rebound and return to the top-level A1 rating that only four other nations boast, has been helped by increased consumerism from a typically restrained, savings-oriented populace. Meanwhile, Spain has dramatically improved its exports to newer, "emerging" economies. This is thanks, in large part, to its newfound ability to compete economically because of its lower labor costs in manufacturing.
Speaking of emerging economies, Coface appeared particularly impressed with the high, newfound growth opportunity from Kenya, Rwanda, Nigeria and Sri Lanka. Analysts indicated each was worth a look despite well-documented, frequently "difficult business environments."
The only country to receive a negative action in the latest risk revisions was Latvia, which Coface removed from the positive watch list. This was almost entirely because of a feared echo effect of Russian involvement and general unrest within the Ukraine, which had been a former up-and-comer economically as recently as a year ago when its government appeared to be heading toward stronger ties with the European Union.
- Brian Shappell, CBA, CICP, NACM staff writer
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Commercial bankruptcy filings continue to languish at historically low levels, and are expected to do so at least until the Federal Reserve begins to raise interest rates. In the meantime, however, an article published in the June issue of the ABI Journal investigates the effect that the Fed's extremely accommodative post-recession monetary policy has had on corporate restructuring and credit markets in general.
In "Fed Policy Regulation's Impact on the Restructuring Industry," authors James Doak of Miller Buckfire & Co. LLC and Steven Argan and Alan Dalsass of MorrisAnderson wonder whether federal government actions taken in the wake of the financial crisis have fundamentally altered the landscape of corporate restructuring.
Doak, Argan and Dalsass note that during the recession, restructuring professionals believed, not without cause, that a rash of bankruptcy cases would logically appear just around the corner. "Throughout 2009, this proved to be true," they said. "What had started in the financial sector was spreading. The restructuring community rolled up its sleeves and set to work to fix/sell/dissolve/untangle the mess. There was the feeling that if you were not already up to your ears with work, you need only wait. The next wave was surely coming."
The expected deluge quickly dried into a drip, however, as the Fed, the Treasury and government agencies sprung into action to stabilize the financial system. Most notably the Fed quickly lowered its target rate, but, working in conjunction with the Treasury, also resurrected several programs designed to be temporary solutions to the problem of a lack of credit availability and lending. "These programs also amounted to trillions of dollars of new capital into the financial system, which, however necessary it seemed at the time, disrupted market dynamics in a way that continues to have persistent, unintended consequences today," they said.
Now, many of these programs are "listing toward entrenched policy," according to Doak, Argan and Dalsass. "They have become an economic crutch that continues to warp credit markets, which is both supporting and hampering the economy."
Rates will eventually increase, however, and when they do, the prolonged period of low interest rates, wherein banks have supported whatever marketable credit they've been able to in order to increase their yields could lead to tougher restructurings and repeat insolvencies. On the other hand, however, the authors note that some restructuring activity could be put off for some time by some otherwise would-be filers due to the fact that several less-regulated financing alternatives have cropped up in the wake of the Fed's effort to regulate commercial lenders. "As these providers of capital exercise their relatively open license to create credit and transition credit risk away from commercial lenders, many restructuring mandates might be postponed due to the presence of such friendly capital," said Doak, Argan and Dalsass.
- Jacob Barron, CICP, NACM staff writer
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