Secured Party Liability for Failure to File Timely TerminationsUCC, Online UCC System, Due Diligence
Can a secured party be liable for failure to file timely finance statement terminations?
According to Section 9-625 of the Uniform Commercial Code, yes. There can be secured party liability for failure to file timely terminations.
But first, let’s take a step back.
In Article 9-513, the section of the Uniform Commercial Code that regards Termination Statements, the below is found under subsection 9-513(b) to address how long a secured party of record has to file a termination statement of a financing statement covering consumer goods if all obligations have been fulfilled by the debtor:
9-513(b) [Time for compliance with subsection (a).]
(1) within one month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or
Subsection 9-513(c), below, governs how long a secured party of record has to terminate a financing statement that covers other collateral types:
9-513(c) [Other collateral.]
In cases not governed by subsection (a), within 20 days after a secured party receives an authenticated demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:
(1) except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;
(4) the debtor did not authorize the filing of the initial financing statement.
So what liabilities can a secured party of record incur for failure to follow these statutes?
Those answers can be found in Code Section 9-625, with a couple of pertinent excerpts below:
(b) [Damages for noncompliance.]
Subject to subsections (c), (d), and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with this article. Loss caused by a failure to comply may include loss resulting from the debtor‘s inability to obtain, or increased costs of, alternative financing.
(e) [Statutory damages: noncompliance with specified provisions.]
In addition to any damages recoverable under subsection (b), the debtor, consumer obligor, or person named as a debtor in a filed record, as applicable, may recover $500 in each case from a person that:
Are you a secured party? Contact us today and consult with one of our experts to learn how FCS can help assure that your Termination Statements are filed in a timely manner so you avoid any secured party liability.