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

NEW UCC ARTICLE 9 REVISION, GOVERNING SECURED TRANSACTIONS, ENACTED IN HALF THE STATES

July 24, 2000-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 creditors' rights in the U.S. for four decades. Now, a major revision of Article 9, drafted and approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999, has been adopted in 26 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, a retailer financing inventory, or a consumer financing furniture for a new home.

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 the creditor's security interest establishes the creditor's priority over other creditors. The usual method for perfecting a security interest is to file a "financing statement" in the appropriate filing office. This notifies subsequent creditors of the existing security interest.

Article 9 specifies how enforceable security interests may be created, perfected and enforced, and who has the first rights in the collateral when two or more competing creditors have legally enforceable interests in the collateral.

There are two especially important components to the 1999 UCC9 revisions. Revised Article 9 expands the scope of property available for secured transactions and both modernizes and simplifies the filing system for perfection of seucrity interests. 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 paper 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.

The UCC9 revision, which becomes effective in enacting states on July 1, 2001, has been enacted in Alaska, Arizona, California, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Montana, Nebraska, Nevada, Oklahoma, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and West Virginia. It was awaiting the Governor's signature in North Carolina, and is awaiting the Mayor's signature in the District of Columbia.