National Conference of Commissioners on Uniform State Laws

211 E. Ontario St., Suite 1300, Chicago, IL 60611
tel 312-915-0195, fax 312-915-0187

For Immediate Release

Montana First State to Adopt 1998 Revision of
UCC Article 9, Governing Secured Transactions

April 16, 1999 - For four decades, Article 9 of the Uniform Commercial Code (UCC)-the law in every state, the District of Columbia and Puerto Rico-has governed the mechanics of granting credit and enforcing secured creditors' rights.

Now, with the signing of Senate Bill 153 by Governor Marc Racicot on April 14, Montana becomes the first state to adopt a major revision of Article 9. Unanimously approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws in 1998, the new revised Article 9 is at different stages of the legislative process in 13 other states.

Trillions of dollars of commercial and consumer credit are granted each year in secured transactions under Article 9-for example a manufacturer financing the acquisition of a machine or a retailer financing inventory, or a consumer financing furniture for a new home. "Personal property secured financing has fueled all aspects of the unparalleled economic growth that the United States has enjoyed in the last decade," says William M. Burke, Chairman of the committee which drafted the revision to UCC9.

Article 9 provides a set of rules that govern any transaction other than a finance lease that involves the granting of credit coupled with a creditor's interest in a debtor's personal property. If the debtor defaults, the creditor may possess and sell the property (generally called collateral) to satisfy the debt. The creditor's interest is called a security interest. Perfection of any creditor's security interest establishes the creditor's priority with respect to all other creditors of the same debtor.

There are two especially important components to the 1998 UCC9 revisions: the scope of property available for secured transactions is expanded; and the filing system to perfect security interests is both modernized and simplified. Improvements in the filing system include a full commitment to centralized filing-one place in every state in which financing statements are filed, and a filing system that will escort filing from the world of filed documents to the world of electronic communications and records. Filing system revisions are particularly necessary to meet the needs of increased volume of economic activity in the United States and the parallel increase in the volume of secured transactions.

Among other changes is a more rigorous standard for the requirement of "good faith" performance, to conform with the standards in other recently revised articles of the UCC. The new revision also clarifies the rules applicable to enforcement of security interests in personal property, promoting certainty for both debtors and secured creditors, and establishes new rules to facilitate secured financing in international transactions.

The UCC9 revision, which becomes effective in enacting states on July 1, 2001, is being studied by bar committees throughout the country, and has been introduced this year in the legislatures of Arizona, California, Hawaii, Indiana, Maine, Maryland, Missouri, Nebraska, Nevada, Oklahoma, Texas, Vermont, and West Virginia.