The 2010 amendments to Revised Article 9 of the Uniform Commercial Code (RA9) are set to go into effect in only a few short months. Some FCS customers and regular readers of the blog have mentioned that they’re a little nervous and have requested additional information. Happy to help, FCS has started a blog series to break down the major points of the amendments and try to eliminate some of the anxiety UCC filers may be feeling about the changes.
This week’s topic is UCC Section 9-518, which involves claims concerning inaccurate or wrongly filed records.
UCC Section 9-518: What’s This About?
UCC Section 9-518 allows a debtor to file a UCC-5 Correction Statement relating to any UCC record that names them as debtor. The intent of this section is to provide debtors a means to “fix” a Financing Statement that was wrongly filed against them.
What Happens Under the Current Version of Revised Article 9?
UCC records evolve over time through a process of addition only, never by subtraction. As an example, when a secured party files an amendment to delete a debtor name, the name isn’t actually removed; there is just a note added to the index to alert searchers that that particular party is no longer bound by the underlying security agreement.
It is the same with a UCC-5 Correction Statement. If a debtor discovers a Financing Statement has been wrongfully filed against them, filing a Correction Statement does not remove the record from the index; it just makes a note that the debtor contests the record’s effectiveness.
RA9 only technically grants debtors the authority to file a UCC-5 Correction Statement, but in practice, filing officers do not reject them when submitted by other parties. Consequently, secured parties routinely file them to make their own notes in the public record, particularly in cases where their UCC has been either fraudulently or accidentally terminated.
What Change is Proposed for 2013?
Under the proposed new version of 9-518, a UCC-5 will be renamed an Information Statement and secured parties will be explicitly allowed to file them. An official comment will also be added to the text of The Code to note that an Information Statement does not have any legal effect on the UCC record – it is simply a way to make a note in the public record.
Readers, we want to hear from you! What are your thoughts? How will this amendment change the way you manage, monitor and/or file your UCC’s?
Check back next week when we tackle another of the 2010 UCC Revised Article 9 Amendments!