|SB 0506||Substantially revises Article 9 of the Uniform Commercial Code concerning secured transactions|
|LR Number:||S2034.01P||Fiscal Note:||2034-01|
|Committee:||Ways and Means|
|Last Action:||04/21/99 - Hearing Conducted H Civil & Administrative Law||Journal page:|
|Effective Date:||July 1, 2001|
SB 506 - This act substantially revises Article 9 of the Uniform Commercial Code regulating secured transactions. The scope of Article 9 is expanded to include additional types of property in which a security interest can be taken by a creditor and additional kinds of collateral, including sales of payment intangibles and promissory notes, security interests created by governmental debtors, health insurance receivables, consignments, and commercial tort claims.
The act clarifies that filing a financing statement perfects a security interest, even if another method of perfection exists. Current law authorizes control, in which the debtor cannot transfer the property without the creditor's consent, as the method of perfection for only investment property. The act also allows control as a method of perfection for letter of credit rights and deposit accounts. Automatic perfection for a purchase money security interest is increased from the current ten days to twenty days. Attachment of a purchase money security interest is perfection for the duration of the twenty-day period, then another method of perfection is necessary to continue the perfected security interest. A purchase money security interest in consumer goods, however, remains perfected automatically for the duration of the security interest.
Current law establishes a basic choice of law rule, as to which state's law governs perfection, its effect, and a creditor's priority, of the state in which the collateral is found. The act chooses the state that is the location of the debtor. If the debtor is an entity created by state registration, the location of the debtor is the location in which the entity is created by registration. If the entity is a corporation, the location of the debtor is the state in which the corporate charter is filed or registered.
The act allows the transition from paper filing to electronic filing. The only local filing of financing statements occurs in the real estate records for fixtures; all other filings are centralized with the Secretary of State's office.
The act changes certain aspects of enforcing a security interest that is included in a consumer transaction: a consumer cannot waive redemption rights in financing agreement; a consumer is entitled to disclosure of the amount of any deficiency assessed against him or her; a consumer buyer of goods who pre- pays in whole or in part has an enforceable interest in the purchased goods and may obtain the goods as a remedy; and a secured creditor cannot accept collateral as partial satisfaction of a consumer obligation.
The act also provides new rules for guarantors, for the interests of subordinate creditors with security interests in the same property, and for aspects of enforcement when the debtor is a consumer debtor.
The repeal of the existing Article 9 provisions and the
enactment of the new provisions take effect July 1, 2001.