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,
WORKING ITS WAY THROUGH STATE LEGISLATURES

January 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, unanimously approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws in 1998, has been adopted in Arizona, California, Maryland, Montana, Nebraska, Nevada, and Texas, and introduced in 11 other state legislatures.

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. "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 the creditor's security interest establishes the creditor's priority over other creditors.

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 1998 UCC9 revisions. Revised Article 9 expands the scope of property available for secured transactions and both modernizes and simplifies the filing system for financial statements. 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 comport 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.

In addition to current legislative activity on UCC9, which becomes effective in enacting states on July 1, 2001, the revision is being studied by bar committees throughout the country.

The National Conference of Commissioners on Uniform State Laws is now in its 109th year. The organization comprises more than 300 lawyers, judges, and law professors, appointed by the states as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, to draft proposals for uniform and model laws and work toward their enactment in their legislatures. Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

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