A Letter from our President, Mark Neeb

What is your corporate New Years resolution? Are you focused on cash flow? Are you maximizing the value of your delinquent accounts at the lowest possible cost?

You need your money to build your business, to invest in new ideas, products and services. You don’t want your budget drained by an army of accounts receivable specialists. Yet, if you don’t invest enough in managing your accounts receivable, bad things happen…and cash flow decreases.

So, what can you do?

We can help by managing your portfolio and connecting to your system from our office or performing our work on-site. Our team of credit professionals becomes your team of credit professionals and your financial goals become our financial goals. We replicate your best practices and help drive home the dollars, all while preserving your customer relationships that you’ve worked so hard to create.

Resolve to do something about your situation today. Contact me at mneeb@theaffiliatedgroup.com for a free consultation and lets ring in the New Year together!

 

Nation's Largest Retailer Opts Out of Check Diversion Program

Wal–Mart recently announced it will no longer be routinely sending bad checks to district attorneys for collection. This announcement coincides with Wal–Mart’s expanded relationship with TeleCheck Services Inc. to provide comprehensive check processing at the point–of–sale and be the primary check collection provider for Wal–Mart and Sam’s Club Stores.

Wal–Mart’s decision has raised concern among district attorney’s offices that have relied on the revenue from fees charged to consumers writing bad check to supplement their office funds.

Currently, 17 states allow district attorneys to conduct check diversion or restitution programs in which the bad check writer can avoid criminal prosecution if they make good on the check, plus pay a number of fees such as collection charges and tuition for a class on check fraud. The fees can run upwards of $200, not counting the amount of the check.

Typically, check diversion programs are operated by private companies under contract with the district attorney’s offices. Under this arrangement, the collection activities are conducted by the private sector contractor, which gives a portion of the fees collected to the district attorney or prosecutor’s office. Many district attorneys and prosecutors have come to rely upon these fees to purchase equipment or even supplement the salary budget for their offices.

These check diversion programs have come under scrutiny from consumer watchdog groups, who charge that consumers who mistakenly write a bad check are being bullied into paying fees far in excess of the amount of the check.

A number of lawsuits have been filed alleging violations of the Fair Debt Collection Practices Act (FDCPA) by the private sector companies operating bad check restitution programs. These companies, with the assistance of the National District Attorneys Association, are seeking exemption from the FDCPA when operating a check diversion program under contract with a district attorney’s office. An amendment providing such an exemption was included in H.R. 3505, a financial services regulatory relief bill that was reported out of the House Financial Services Committee on Nov. 16, 2005 and awaits action by the full U.S. House of Representatives.

ACA International strongly opposed the amendment as a measure that strips consumers of important rights and provides an unlevel playing field among debt collection companies that specialize in check collections.

According to news reports, district attorneys organizations are contacting Wal–Mart to express their displeasure with the retailer’s decision. Wal–Mart spokesman, Marty Heires, explained that Wal–Mart decided to use a national collection agency to handle bad checks to standardize procedures. Some stores use a third party to collect on bad checks, while others use county prosecutors.

“We felt we needed to add some consistency, not only for accounting purposes but also to make sure our customers were treated consistently around the country,” he said.

Heires went on to say that Wal–Mart was reviewing its bad check program and would make a decision in January as to whether any changes would be made in the program.

 

 

Bankruptcy Filings Set Record on Eve of New Law

Quarterly filings for the three–month period from July 1, 2005, to Sept. 30, 2005, set a single–quarter filings record, increasing by 36.7 percent when compared to the same period in 2004, according to new data from the Administrative Office of the U.S. Courts. This quarter immediately precedes the new Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which was enacted on April 20 and took effect on Oct. 17. The record pace continued into October, when more than 600,000 new bankruptcies were filed nationwide, compared to just 130,679 in October 2004.

During the third quarter of 2005, the first full quarter since the passage of the new bankruptcy law, a total of 542,002 bankruptcies were filed. That is an increase of 74,669 cases when compared to second quarter 2005 filings, which totaled 467,333, the previous three–month record.

The overall quarterly increase was primarily fueled by a surge in Chapter 7 filings. Total Chapter 7 filings rose 18.4 percent from the second quarter, from 362,481 to 429,299; 98.4 percent of those Chapter 7 filings were by individuals with household debt. The new law makes it harder to file under Chapter 7.

“Consumers with heavy household debts stormed the bankruptcy courts this fall, rushing to beat the deadline of the new law,” said Samuel J. Gerdano, executive director of the American Bankruptcy Institute.

The number of bankruptcy cases filed in the 12–month period ending Sept. 30, 2005, totaled a record 1,782,643, up 10.1 percent from the 1,618,987 bankruptcy cases filed in the 12–month period ending Sept. 30, 2004. Non–business filings for the period totaled 1,748,421, up 10.4 percent from the 1,584,170 non–business filings during the 12–month period ending Sept. 30, 2004. In the 12–month period ending Sept. 30, 2005, business filings dropped to 34,222, down 1.7 percent from 34,817 filings reported in the previous 12–month period.

Of the total number of bankruptcy filings in the 12–month period ending Sept. 30, 2005, there were 1,346,201 Chapter 7 filings, a 16.7 percent increase over the 1,153,865 Chapter 7 filings for the same period in 2004. The next largest group of filings was Chapter 13 filings at 429,316, a 5.8 percent decrease from the 454,412 filings in the 12–month period ending Sept. 30, 2004. Chapter 12 filings totaled 364, a 52.9 percent increase from the 238 filings in the 12–month period ending Sept. 30, 2004. Reflecting the strong economy and low interest rates, Chapter 11 filings fell from 10,368 to 6,637 in the 12–month period ending Sept. 30, 2005, a 56.2 percent decrease.

 

 

More Than Half of U.S. Online Households Pay at Least One Bill Online

More than half (56 percent) of U.S. online households are paying at least one bill online, up from 52 percent in June 2004, according to CheckFree Corporation. Currently, 87 percent of users who pay their bills from a single “consolidated” Web site, such as a bank, brokerage, credit union or Internet portal, say they receive the service for free.

For the first time, online banking and bill pay features surpassed the more traditional bank selection criteria of bank branch and ATM proximity to home. The availability of online banking and bill pay features ranked third among the top three factors in selecting a bank for personal accounts, following “availability of free checking” and “reasonable fees and service charges.”

Although they voice concerns about fraud, online consumers said they have continued to pay their bills electronically. According to the survey, the volume of bill payments made at consolidated sites, primarily banks, increased 24 percent from June 2004 to March 2005.

The bank branch was cited as an important initial source of information among consumers who are already paying their bills at a consolidated service, with 25 percent naming the branch as the most influential source of information when they decided to enroll.

 

 

Hospital CEOs Rank Bad Debt a Top Concern

According to a report released on Dec. 30, 2005, by the American College of Healthcare Executives, the top issues confronting hospital CEOs remained the same in 2005. The survey asked respondents to rank the three most pressing issues affecting their hospital and identify specific areas of concern.

Financial challenges far exceeded other issues as hospital CEOs’ number one issue. This year, 67 percent of respondents cited financial challenges as one of their top three concerns, reflecting a modest decline from 71 percent in 2004. Personnel shortages were ranked the second concern with 36 percent of respondents selecting this issue. Care for the uninsured rounded out the top three, with 35 percent of respondents indicating concern over this issue.

Within each of the top three issues, respondents also identified specific concerns facing their hospital. Within the issue of financial challenges, bad debt ranked third, with 68 percent of CEOs citing this as a concern. Medicaid and Medicare were the top two financial concerns. Bad debt was followed by revenue cycle management, which ranked fourth with 44 percent of respondents noting it as a concern. Also mentioned were managed care payments (42 percent) and other commercial insurance (30 percent).

For more information, please visit http://www.ache.org.