CT Lien Solutions Blog

MN SOS will not shut down

The Minnesota Secretary of State will remain open during the MN State Government Shutdown. Read the official press release here.

Potential shutdown of MN Secretary of State and its impact on lien perfection and notice

Due to budget constraints in the state of Minnesota, the state faces a possible shutdown of Secretary of State services. Read the official press release here.

The decision to shut down will be made after a pending court proceeding determining which state services are to be deemed “essential”. Should the shutdown occur, it will likely take effect on July 1, 2011.

CT Lien Solutions would like to help minimize the impact on lenders. Lenders, if you have UCCs that are nearing expiration or require amendments, or if you are currently considering new loan applications with collateral/debtors in the state of MN, you may wish to consider the following preemptive actions, all to be completed before July 1, 2011:

• File upcoming continuations
• File any necessary amendments
• If you are currently in the due diligence stage for a new loan, pre-file your UCC1 now after obtaining authorization from the borrower; also conduct all necessary searches
• In the event of a shutdown, submit paper filings via USPS; 9-516 of the Uniform Commercial Code provides that filing is constituted by communicating the record to the filing office and tendering the filing fee

For assistance with any of your search and filing needs in the state of MN, contact your CT Lien Solutions Customer Representative. Prospective customers, e-mail CT Lien Solutions at info@ctliensolutions.com.

Check back into the blog for more details as we receive them.

New legislation affects filing in North Dakota

We’ve got an update on new legislation affecting filing in North Dakota. However, don’t confuse this with the flurry of legislative activity we’re seeing with states adopting NCCUSL’s proposed amendments to the UCC Article 9! This piece of legislation is not an amendment to the Article 9. However, if you are filing UCCs in ND, you’ll want to read on.

On April 26, 2011, the Governor of North Dakota signed into law Senate Bill 2249. The bill removes several of the non-uniform filing requirements that exist in North Dakota regarding social security numbers and federal tax identification numbers on financing statements.

North Dakota’s current law requires that a social security number or federal tax identification number be included on any financing statements filed under Article 9 of the UCC or the Food Security Act. In addition, current law authorizes the filing office to reject any financing statements that do not contain these numbers.

Under the new law, effective January 1, 2012, both of these provisions have been deleted. As a result, parties filing UCC financing statements after this date will no longer be required to provide this information.

IN fourth state to enact new UCC Article 9 laws

On April 20, the Governor of Indiana signed into law IN HB 1321, making Indiana the fourth state to enact new UCC Article 9 amendments. Like Nebraska and North Dakota, Indiana has adopted Alternative A for 9-503, so searchers can breathe a sigh of relief—if the individual has an IN driver’s license or state ID, that’s the name you will need to search under beginning July 1, 2013.

Lenders filing in Indiana, Nebraska and North Dakota, since you know that as of July 1, 2013, your filings for individual debtors must be made under the name contained on the state driver’s license or ID of the individual, it’s not too soon to start conforming.

Nebraska and Washington enact new UCC Article 9 laws

Two more states enacted new UCC Article 9 amendments last week. On April 14, Nebraska and Washington signed into law NE LB 90 and WA HB 1492, respectively.

Nebraska’s bill is uniform to the model act* across the board, with Alternative A chosen for 9-503, and reference to placeholder text only for 9-521.

Washington treats 9-521 the same and is also uniform in all respects, except the state has opted for Alternative B for 9-503. This means that unlike North Dakota and Nebraska, Washington will allow for a “safe harbor” in individual debtor names. If an individual debtor has a WA driver’s license, the financing statement is sufficient if it uses the name found therein. However, unlike Alternative A, it also allows for other individual names to be used, such as the surname and first personal name.

What does this mean in a practical sense? Well, searchers beware in Washington. Under Alternative B, a variety of debtor names will be sufficient, so searchers will need to conduct a more expansive search to ensure that all possible name variations are uncovered.

*For more information about the various provisions of the model act, visit the “Legislation and Judgments” category of this blog.

North Dakota first state to enact new amendments to UCC Article 9

On April 4, 2011, North Dakota’s Governor signed into law HB 1137—making ND the first state to officially adopt the new amendments to the UCC Article 9.

The amendments are uniform across the board. As regards section 9-503: Name of Debtor and Secured Party, ND enacted Alternative A. Alternative A provides that if an individual debtor has a driver’s license issued by the State of North Dakota, the financing statement must use the name indicated on that license. If an individual debtor does not have a driver’s license or ID issued by ND, the financing statement must use the surname and first personal name of the individual.

No reference was made in the bill to amending the UCC-1 and UCC-3 forms.

New requirements for South Carolina Secretary of State

The South Carolina Secretary of State (SC SoS) issued an announcement regarding new UCC forms and procedures. Click here to view the announcement.

Below is a summary of the changes:

1. In preparation for launching a new online UCC system, the SC SoS is mandating new forms and requirements effective for all UCC transactions received in paper form in the SC SoS’s office after April 7, 2011.
2. The new UCC forms must be used and older versions of the forms will be rejected.
   • The new UCC forms have minimal changes. The most obvious are changes to the barcode/form number at the top of the form, the inclusion of the text “DO NOT PROVIDE” in the Tax ID/SS# field, and the text “NOT USED” has been added to the search-to-reflect field. In addition, the SoS office address and a new form version date (03/01/11) has been added to the bottom of the forms.
3. An individual payment must accompany each filing. The SC SoS’s office will not accept one check for multiple filings.

Click here to view the new forms on the South Carolina SoS website.

Article 9 amendments: Non-uniformity could create risk for lenders

As you can see from the bills we pointed to in yesterday’s post, many of which we’ve described in previous blog postings, individual states are free to examine the Model Act proposed by NCCUSL and adopt all, none or part of the proposed revisions as they see fit. This is resulting in non-uniformity across jurisdictions—certainly nothing new to the Uniform Commercial Code.

Nonetheless, the goal of the “Uniform Commercial Code” is uniformity amongst the states, and it’s easy to see why. There are several provisions in the proposed RRA9 amendments where non-uniformity creates a greater risk for lenders. We briefly describe these areas below, referencing the relevant code section, should you desire to read the actual text using the links in our previous post.

Uniform Effective Date of July 1, 2013

Ideally, each state will adopt RRA9 with the proposed effective date of July 1, 2013. A uniform effective date reduces the risk that lenders will have to deal with a multitude of forms, debtor name requirements, organizational information such as organizational ID numbers, etc. In addition, the RRA9 amendments include some substantial revision of Section 9-316, as it relates to the continued perfection of a security interest when a debtor’s location changes or a transfer of collateral is made. As a result, if a jurisdiction chooses an earlier or later effective date, it will be much more difficult for lenders to monitor and maintain their UCC filing records.

As of the date of this post, the following states are likely to adopt the proposed effective date of July 1, 2013: CT, IN, MN, NE, ND, NV, OK, WA. At this time, we are unable to report on Massachusetts’s intentions, as it has not published text for the House Bill 25.

9-521: Uniform Form of Written Financing Statement and Amendment

Section 9-521 was designed to provide a uniform form for both the UCC-1 financing statement and UCC-3 Amendment. These forms are often referred to as the “national forms”.

The drafters of RRA9 also intended for uniform forms to be part of the amendments. However, there are still some issues that need to be resolved regarding the UCC forms. As a result, at this point in time some of the legislation to enact RRA9 contains “placeholder” text, rather than depictions of the actual forms. Also, some states may propose legislation omitting any references to 9-521 or the UCC forms.

These issues will need to be resolved before the effective date of any legislation—although with a uniform effective date of July 1, 2013, there is plenty of time for all form issues to be resolved, and for appropriate amending legislation to occur as needed. Of course, CT Corporation will always keep you informed of any changes to UCC forms or related information.

States proposing amendments with placeholder text or forms:

NE, OK, IN, WA (has forms and instructions in statute)

States proposing amendments with no reference to 9-521 or forms:

CT, MN, ND, NV

9-503: Name of Debtor and Secured Party

Section 9-503 addresses the sufficiency of a debtor’s name, and sets forth the standards for “getting the debtor name right”. Current Article 9 does not provide much direction regarding individual debtor names. RRA9 offers two alternatives, commonly referred to as the “Only If” option (Alternative A) or the “Safe Harbor Option” (Alternative B).

Simply put, Alternative A provides that if an individual debtor has a “driver’s license”, the financing statement must use the name indicated on the license. If an individual debtor does not have a driver’s license, the financing statement must use the surname and first personal name of the individual.

Alternative B provides that if an individual debtor has a driver’s license, the financing statement is sufficient if it uses that name. However, unlike Alternative A, it also allows for other individual names to be used, such as the surname or first personal name.

In a practical sense, the difference between Alternative A and Alternative B has a significant impact upon a party searching the UCC records. If a jurisdiction adopts Alternative A, a searcher is assured that searching the name indicated on the most recent, valid driver’s license is sufficient. Under Alternative B, a variety of debtor names are generally sufficient, and a searcher will need to conduct a more expansive search to ensure that all possible name variations are uncovered. It will be imperative for a searcher to understand the individual name standards in each jurisdiction, as well as the effects of a particular state’s search logic upon the name standards, in order to conduct a compliant UCC search against an individual debtor.

States choosing Alternative A (Only If) standard for individual debtor names:

MN, ND, NE, OK

States choosing Alternative B:

CT, NV, WA

Non-Uniform Treatment of Individual Debtor Names:

Indiana chose a non-uniform provision regarding individual debtor names--basically Alternative B with the driver’s license language removed. And, as a reminder, Massachusetts has not yet published the text of its bill, so it remains unknown which alternative it will ultimately choose.

Please feel free to contact us if you have any questions or comments about the new Article 9 Amendments.

Article 9 amendments: State-by-state breakdown

As we’ve often discussed in previous blog posts, Article 9 of the UCC is once again undergoing some significant changes. Throughout 2011, and likely into 2012, legislatures across the United States will be proposing, reviewing, debating, amending, and, in most cases, passing legislation adopting the revisions proposed by NCCUSL in July 2010. In this and later posts, we will refer to this new legislation as RRA9.

The good news is that there should be plenty of time to prepare for any changes to Article 9! The proposed legislation has a uniform effective date of July 1, 2013, and it appears that most states will adopt this date.

In today’s and tomorrow’s posts, we will go into more detail about what action specific states are taking, and how potential non-uniformity amongst states could create risk for lenders.

State Legislation – UCC Re-Revised Article 9 (RRA9)

Across the United States, there are currently 12 bills pending that relate to the Article 9 revisions. Follow the links below to read the text of the bills or track a particular bill’s status.

• Connecticut House Bill 6274
• Connecticut House Bill 5456
• Indiana House Bill 1321
• Indiana Senate Bill 341
• Massachusetts House Bill 25 (no text available)
• Minnesota Senate Bill 194
• North Dakota House Bill 1137
• Nebraska Legislative Bill 90
• Nevada Assembly Bill 109
• Oklahoma House Bill 1833
• Oklahoma Senate Bill 609
• Washington House Bill 1492

CT Corporation’s Government Relations department is actively tracking this and future legislation. We’ll keep you informed as major developments occur.

Check in tomorrow for more detail on some of the specific provisions being considered by the individual states, as well as some of the risk factors stemming from non-uniformity across jurisdictions.

IN fourth state to initiate new UCC "RRA9" bill

On January 11, 2011, Indiana became the fourth state to introduce legislation (Senate Bill 341) to adopt new revisions to the UCC Article 9. (See our previous posts on the first three states to move toward adoption:  Nevada, North Dakota and Nebraska). The IN bill appears to substantially adopt the model language, as proposed by NCCUSL this past summer.

However, there is one glaring non-uniform provision in Indiana’s legislation, and it relates to the treatment of individual debtor names in section 9-503. As you may recall from previous postings on this blog, the Model Act contains two alternatives regarding standards for individual debtor names.

Unlike the legislation other states have been introducing, Indiana's Senate Bill 341 does not fully adopt either alternative, but instead adopts only portions of Alternative B. This legislation specifically rejects the use of the driver’s license as a method for determining the name of an individual debtor.

For further details on the text of the introduced bill, visit the Indiana General Assembly website.