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The 2010 UCC Article 9 Amendments Take Effect July 1, 2013 — Are You Ready?
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The 2010 UCC Article 9 Amendments Take Effect July 1, 2013 — Are You Ready?

Several months ago, we gave our readers a heads-up to get ready to implement the 2010 Amendments to Article 9 of the Uniform Commercial Code (UCC) which take effect on July 1, 2013. With the changeover date right around the corner, we want to dedicate a few articles to highlight the differences UCC financing statement filers need to know.

Despite conflicting opinions among filers today, Article 9 was created several decades ago to simplify and clarify the process for perfecting a security interest in personal property. Article 9 made the process cheaper and more efficient, transparent, and uniform. Various amendments improved the process further over the years, including an overhaul in 2001.

One aspect of the 2010 Amendments is intended to fix a problem which has continued to vex filers — recording the debtor’s name properly on financing statements. Problems such as nicknames, name changes, and cultural differences in naming conventions created problems of varying degrees. In actual cases, a court in one jurisdiction found “Mike” was sufficient to identify an individual debtor whose actual name was “Michael,” while a court in another jurisdiction arrived at the opposite conclusion.[1]

As part of the 2010 Amendments, states were provided with two options for determining the individual debtor’s correct name for financing statement purposes. Forty-six states have passed or one of two alternatives for ensuring the adequacy of a debtor’s name for financing statement purposes. Maine, New York, and Vermont are still awaiting introduction in the state legislature and Delaware has adopted a non-uniform version.

Alterative A says a secured party has a perfected security interest “only if” the debtor’s name on the financing statement matches the debtor’s name as it appears on the debtor’s state-issued drivers license or state ID card.  If the individual debtor does not have a drivers license or ID card, then the secured party should use the individual’s first personal name and surname. The states that chose this option are known as only-if states.

Alternative B is commonly referred to as the safe harbor alternative. The provision permits filing financing statements against the “name of the debtor” as provided under current Article 9, but provides a safe harbor for using the name designated on state-issued drivers licenses or state ID cards.

Follow this link to take a look at the new 9-521 forms. We plan to discuss many common questions about the 2010 Amendments in upcoming articles, so be sure to check back soon to ensure your business’s financing statements follow the new law.

If you are a lender or other secured party with questions about implementing changes required by the 2010 Amendments, be sure to seek the advice of experienced legal counsel before the 2010 Amendments take effect. The attorneys at Glass & Goldberg are committed to helping you minimize risk and manage uncertainty, and can help structure your policies and procedures to meet your goals.

Glass & Goldberg provides high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law.  Call us at (818) 888-2220, email us at info@glassgoldberg.com, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

[1] See In re Erwin, 50 UCC Rep Serv 2d 933, 2003 Bankr. LEXIS 692 (Bankr. D. Kan., June 17, 2003) and In re Larsen, 2010 WL 909138, 72, UCC Rep.2d 187 (Bankr. S.D. Iowa 2010)

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