Federal Reserve Board Chair Janet Yellen stated at a congressional hearing on February 11, 2016, that the Federal Reserve is "looking at" implementing negative interest rates in the United States. For many years the Fed kept interest rates low in an effort to stimulate borrowing and economic growth. Countries like Japan have taken this a step further by implementing negative interest rates, which effectively penalizes depositors for leaving their money in banks. The central bank's negative interest rates get passed on to bank customers in the form of fees and surcharges.
Most people in the construction industry recognize the term "slow pay," used to describe the practice of an owner or contractor holding on to money as long as possible before paying contractors in order to reap the benefit of the interest on that money. Could negative interest rates engender a new term, "slow collect," to describe situations in which contractors seek to shift the burden of holding money to owners or upper-level contractors? Might contractors change their contracts to include early payment penalties? Might contractors rely more heavily on mechanic's lien rights, and the statutory interest rates provided by many mechanic's lien statutes? It would seem foolish not to do so when collecting and depositing money would subject a contractor to further fees and bank charges, while filing a lien and leaving an account uncollected would allow a contractor to reap the benefit of statutory interest and avoid deposit fees and charges. Obviously, cash flow issues and the attendant costs of asserting lien rights would need to be weighed against any choice to "slow collect," but the possibility remains that, in certain circumstances, contractors might profit by "slow collecting." Banks too may be willing to loan against receivables, and factoring companies might also benefit from this environment.