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The 2013 UCC Revised Article 9 Amendments Are Almost Here – Have no Fear! Part Four: Naming an Individual as a Debtor

UCC, Revised Article 9

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 regular readers of the blog have expressed apprehension about the changes and have requested additional information. In response, FCS started a blog series to break down the major points of the 2010 amendments to help eliminate some of the anxiety UCC filers may be feeling about the changes.

As we have discussed on this blog in numerous previous posts, a UCC Financing Statement is only effective if it correctly lists the exact debtor name. A UCC Financing Statement that does not properly identify the debtor will not perfect a security interest and will not offer the secured party priority status to collect.

As it is written today, the Uniform Commercial Code offers little guidance on how to determine  the exact name for an individual debtor. Section 9-503 (a)(4)(A) of the Uniform Commercial Code simply states that a UCC Financing Statement sufficiently provides that name of an individual debtor if it lists the “name of the debtor.” Considering complexities such as nicknames, former names, generational notations, hyphenated or dual last names, ethnic names, etc., secured parties can find it difficult to nail down the exact name for an individual debtor.

Furthermore, there have been several conflicting court decisions in recent years relating to the naming of individuals debtors, leaving secured parties unsure of how best to list their individual debtors on the UCC Financing Statement form.

Perhaps the most welcome and most broadly applicable changes included in the proposed amendments involve new rules and clear-cut instructions for naming individual debtors on UCC Financing Statements.

The drafters of the amendments created two separate provisions relating to the naming of individual debtors, allowing individual state legislatures to choose from the two alternatives and adopt the option that they believe will best meet the needs of UCC filers under their jurisdiction. These two alternatives are commonly referred to as the “Only If” alternative and the “Safe Harbor” alternative.

What follows is a brief discussion of each alternative:

Alternative A – “Only if”
Under Alternative A, a UCC Financing Statement sufficiently identifies an  individual debtor only if the name on the document is listed as it appears on the individual’s driver’s license or state-issued identification card (if they hold no driver’s license). If the debtor has neither a driver’s license nor state-issued identification card, secured parties may list the debtor’s name as the individual name or personal name and surname.

Alternative B – “Safe Harbor”
Under Alternative B, the existing “name of the debtor” language will remain in UCC Section 9-503, and naming an individual in this way will still effectively perfect a security interest, but the alternative also provides a “safe harbor” for secured parties using the debtor’s name as it appears on their driver’s license or state-issued identification card.

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 for a more detailed discussion of Alternatives A and B!