CMI Recovers Slightly in September

Companies are likely delaying expansion decisions until after the election, results from the latest Credit Managers’ Index (CMI) suggest.

While some people assert this concern will continue into next year, others “believe that once the dust settles there will be an opportunity for some real growth as all that pent-up demand is released,” said NACM Economist Chris Kuehl, Ph.D.

Overall, the CMI recovered in September, moving from 52.0 to 53.7 and reflecting a combined total in line with July. Favorable factors categories and the manufacturing sector lead the turnaround, Kuehl noted. “Service is lagging for now and at this point it may be a couple of months before there is a reversal.”

Together, the index of favorable factors and unfavorable factors “showed a lot of improvement,” Kuehl said. The favorables combined score rose about three points, month-on-month.

Most of the unfavorable categories, however, held close to last month’s numbers, and continue to drag down the index. The most significant improvement reported by survey participants was in dollar amount beyond terms, while bankruptcy filings remained stable, which means more customers are paying within terms.

“This month may be an anomaly, but we certainly hope not,” Kuehl added. “It is hoped that this data is a harbinger of things to come; but after the last few months of intense gyrations, there is certainly no guarantee.”

- Diana Mota, associate editor

 

Credit Congress Conference for credit managers

Call For Proposals: Deadline is here—Submit Now!

The National Association of Credit Management will hold its 121st Credit Congress & Exposition in Grapevine/Dallas from June 11-14, 2017. Please click here to fill out the form to submit abstracts, proposed sessions and communications pertaining to participation in the program. Submissions must be made using this form.

Please submit ideas by Sept. 30, 2016. Any proposals that are incomplete or are received after this date will not be considered.

Supreme Court Ponders Whether to Hear Debt Collections Cases on Next Docket

Parties to two appeals cases with conflicting rulings are asking the Supreme Court of the United States to determine if a credit collection agency can pursue bankruptcy claims that would otherwise be time-barred.

Both cases—Midland Funding, LLC v. Johnson in the 11th Circuit and Owens v. LVNV Funding, LLC in the 7th Circuit—present the quandary of whether filing a proof of claim for an un-extinguished, time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act (FDCPA), according to court documents. These cases involved disputes with debt collection companies that filed in order to collect on the claims, if no one objected.

Trade creditors should take note of whether the Supreme Court decides to hear either or both of these cases. They are important because some courts are looking at personal guarantors and/or sole proprietors as individuals that may be subject to protection under the FDCPA, said commercial law and creditors’ rights attorney, Wanda Borges, Esq., member of Borges & Associates LLC. Her advice when it comes to bankruptcy matters: If it’s a stale claim where the statute of limitations has run, don’t bother filing a claim as it may be considered an attempt to collect a time-barred debt. Although the FDCPA is applicable to third-party debt collectors, the filing of a stale claim may be considered a violation of the automatic stay. If a collection agency files the claim on behalf of the creditor and the court determines it is an attempt to collect a debt and therefore a violation of the FDCPA, it can wind up costing thousands in fines and attorneys’ fees.

In the Midland case, because the date of the last transaction was more than six years before the petitioner’s filing, the debt was time-barred under relevant Alabama state law. The 11th Circuit reversed a lower district court’s ruling, saying the debt collectors violated the FDCPA when they filed such claims. The 11th Circuit also said that despite agreeing with the district court, the Bankruptcy Code allows creditors to file proofs of claim on time-barred debts. Further, applying the FDCPA to such conduct does not give rise to an irreconcilable conflict with the code. That ruling contradicts rulings in the 4th, 7th and 8th Circuits—including the Owens case—which holds that filing an accurate proof of claim for a time-barred debt in a bankruptcy proceeding does not violate the FDCPA, Supreme Court documents state.

 

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Surveys Find Credit Concerns Rank High, CFO Appetites for Risk Tempered

Two recent surveys that tap into the concerns of corporate teams and leaders show that B2B credit issues are foremost on their minds.

Treasury and finance teams are most concerned about currency volatility and third-party payments fraud, followed closely by credit risk, according to a survey of 110 professionals who work in treasury, finance, risk management or business management. The 2016 Credit Risk Management Survey, conducted by online publication Treasury & Risk and sponsored by Moody’s Analytics, finds about 63% of participants are concerned or very concerned about the credit risk of trading partners and/or financial counterparties, followed by commodity price volatility (39%), interest rate risks (38%) and payments fraud perpetrated by employees (28%).

The survey phrase credit risk of a few large companies, to which we have a lot of concentrated exposure resonated with 26% of respondents as their No. 1 concern about credit risk. About 31% indicated it was their second or third concern. Only about 10% rated credit risk of a large number of companies, to which we have smaller exposures, as their top concern. “Most of those do business in either retail/distribution or the technology sector,” the survey findings state.

The survey also finds that most respondents were concerned about customers failing to pay at all (43%) versus customers paying slowly (26%). Many of the respondents in the first category were in retail/distribution, telecommunications and transportation/logistics, the survey notes.

“Corporate treasury and finance professionals are afraid that a single large customer will fail to pay,” Treasury & Risk stated. “They worry that problems at a crucial supplier or distributor might wreak havoc with their supply chain. And they fret that if a financial counterparty failed, they might lose capital or lose access to credit.”

The other survey analyzes CFO business sentiment. North American CFOs saw a strong rebound in optimism compared with a first-quarter low not seen in more than three years, according to Brexit: Overhang or Hangover?, the Q2 2016 Deloitte Global CFO Signals report. “But given the low starting point, the rebound was relative, not absolute,” notes the report, which covers surveys of Australia, Belgium, Japan, the Netherlands, North America, Russia, Sub-Saharan Africa, Switzerland and the United Kingdom. Concern about oil prices and the upcoming election, however, “translated into assessments of the North American economy that were only slightly better than last quarter’s survey lows,” it finds.

Patricia Buckley, managing director of economic policy and analysis for Deloitte Research, Deloitte Services LP, noted “even that optimism might be short-lived, given that the last three quarters of GDP reflected a contraction in business investment,” the report states. It also notes that most CFOs have tempered appetites for risk.

 

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Construction Roundup: False Payment Certs in MA, Ohio Sub Sues for Contract Breach and Design Services Down

A contractor that considers intentionally submitting false payment certifications to the owner of a construction project and then hoping that later payment will nullify potential consequences should think twice about that position, thanks to a recent ruling in the Massachusetts Superior Court.

The court ruled that contractor G4S Tech, which sought millions of dollars for alleged extra work, as well as its contract balance, on a state and federally funded project with the Mass. Technology Park Corp. to design and construct a fiber optic network, should recover nothing from the suit, according to a case analysis by attorney Elizabeth Wright, Esq., of Boston firm Robinson+Cole.

In Ohio, a subcontractor hired to renovate the LeBron James Family Foundation College of Education building at the University of Akron (UA) is suing the university and a prime contractor for breach of contract, while it seeks payment from Fidelity and Deposit Company of Maryland, a surety, for bond foreclosure.

Duer Construction Co. is suing the three entities in the Summit County Common Pleas Court for about $98,000 each, according to the Beacon Journal. Problems started when UA fired Mid-American Construction LLC, a general contractor (GC) hired by UA, over construction delays. Duer claims it furnished material, services, equipment and machinery to the GC, and wants the firm to pay it back for those expenses, while it seeks payment from UA for an alleged breach of contract. The GC’s president said the project had multiple prime contractors and blamed the UA for scheduling issues.

The case highlights the need for suppliers to stay on top of their job accounts, for example, to check if there are actually any delays that could lead to nonpayment, said Connie Baker, CBA, director of operations for NACM’s Secured Transactions Services.

Demand for design services from the nation’s architects—a leading economic indicator of construction activity—has fallen below the positive mark for the second time this year, according to the Architecture Billings Index (ABI).

The ABI, an indicator reported by the American Institute of Architects (AIA) that reflects the approximate nine- to 12-month lead time between architecture billings and construction spending, was 49.7 in August, down from 51.5 in July.

“Given the solid numbers for new design contracts and project inquiries, it doesn’t appear that this is the beginning of a broader downturn in the design and construction industry,” said AIA Chief Economist, Kermit Baker, Ph.D. The new projects inquiry index rose in August to 61.8 from 57.5 in July, AIA said.

- Nicholas Stern, editorial associate

 

National Association of Credit Management Regional Credit Conferences for Credit Managers

Connect, Network, Learn and Share

Held each fall, the regional conferences are a wonderful opportunity for members to learn and grow by attending educational sessions and network with fellow credit professionals from their respective geographic regions.

Western Region Credit Conference
October 12-14, 2016
Renaissance Seattle Hotel
Seattle, WA
Hosted by: NACM Business Credit Services

Central Region Credit Conference
November 9-10, 2016
Crowne Plaza Hotel
Independence, OH
Hosted by: NACM Great Lakes Region

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