As expected, California Governor Jerry Brown signed Assembly Bill 1858 on Monday, August 25. This means that effective January 1, 2015, California will join the majority of states and the District of Columbia in adopting what’s commonly called “Alternative A” or the “Only If” approach for individual debtor name sufficiency, which provides that the debtor’s name on the financing statement will be sufficient “only if” the name provided is the name on the driver’s license.
A reader recently asked, "If AB 1858 is approved, you have mentioned that the change in the law won’t go into effect until the first of next year. Does it make sense that if an individual debtor in California has an unexpired California driver’s license or state-issued identification card and we intend to file a UCC-1 between now and year-end, that we immediately start providing the debtor name just as it appears on the license on such filings?”
In short, the answer is YES! We have yet to see a contested case anywhere in the U.S. where the court invalidated a UCC-1 filing for having too many debtor names listed on the form. That only occurs when none of the names provided on the financing statement are the correct debtor name for filing as provided in 9-503. There is very little potential downside for listing the name from the driver’s license as an additional debtor name on the financing statement if it differs from the name derived from other sources.
While the transition provisions in AB 1858 clearly provide that pre-January 1, 2015 date financing statements lacking the driver's license name remain effective until amended, lapsed, or continued, the secured party – by including the name from the driver’s license initially – will provide potential third-parties with notice under the driver's license name in addition to any other currently correct names for filing.
Passing the Alternative A language this year in a separate bill from last year’s AB 502 created a need to change the transition provisions somewhat to accommodate a separate effective date from the remainder of the 2010 Amendments. Next week we will take a closer look at those transition provisions, along with two significant deviations in the California language from the uniform text.
Also look next week for an update of our RRA9 State Matrix.