UCC Termination Statements, a Trap for the Unwary: Part SevenUCC
We are pleased to welcome back guest author, attorney, Bennett L. Cohen to the FCS blog! Read on for the seventh installment in his blog series addressing the intricacies of UCC Termination Statements.
UCC Termination Statements, a Trap for the Unwary: Part Seven
If a debtor has in fact paid off its debt in full to a secured party, and the secured party delays in providing terminations, a debtor is authorized to terminate the secured party’s filing under the following Code sections (which are different for consumer collateral and commercial collateral):
Consumer Goods – Under Code Section 9-513, secured parties must terminate a UCC filing covering consumer goods once the secured obligation is paid and there is no further commitment to extend credit. Such terminations must be filed by the secured party within the earlier of (a) one month after the secured obligation is paid and there is no further commitment to extend credit, or (b) twenty (20) days after the secured party receives an authenticated demand for the termination from the debtor.
Non-Consumer Goods – Under Code Section 9-513, a secured party generally must terminate a UCC filing covering non-consumer (i.e., commercial) collateral within twenty (20) days after a secured party receives an authenticated demand from the debtor, and the secured party must, within said time period, send the debtor the termination or file the termination in the appropriate filing office. Such obligation to terminate is conditioned upon the secured obligation being paid and there being no further obligation to make an advance, incur an obligation or otherwise give value.
Debtor’s Ability to File Terminations. If the secured party does not comply with such termination requirements listed above for consumer or non-consumer goods, Code Section 9-509(d) (2) provides that the debtor may file the termination statement. This is the instance described earlier in which the debtor is “authorized” by statute to file the termination itself.
It should also be noted that a secured party can be liable for actual and statutory damages under Code Section 9-625 for failure to timely provide to the debtor (or file) the termination statement.
About the Author
Bennett L. Cohenis a partner in the law firm of Cohen, Salk & Huvard, P.C. in Northbrook, Illinois, a Chicago suburb. Bennett regularly represents banks, commercial finance companies, insurance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial loans, commercial real estate mortgage and construction loans, mezzanine loans, leveraged acquisitions, equipment lease loans and factoring transactions. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. Bennett can be contacted at email@example.com.