Iowa Banking Law Blog
What’s In a Name? Your Collateral.
Jul. 1, 2013 – John E. Lande, Iowa Banking Law Blog
Iowa financial institutions should be aware of an important change to the requirements for perfecting liens on personal property, agricultural products, and other forms of collateral. Effective July 1, 2013, all UCC financing statements that name an individual as a debtor must use the debtor’s name exactly as it appears on the debtor’s driver’s license. This new rule applies to all financing statements filed after July 1, 2013.
This rule change should not come as a surprise to most creditors because the UCC already requires the exact legal name for debtor entities. This blog has previously detailed the requirements for naming an entity on a financing statement. The rule for entities remains the same.
For financing statements that are already on file, there is no need to amend. However, a creditor wishing to extend the perfection period by filing a continuation statement must comply with this rule change. The debtor’s name on the continuation statement should match the debtor’s name on his or her driver’s license. If a debtor does not have a current driver’s license, the creditor may want to consider some other legal document—like a birth certificate—to determine the debtor’s legal name.
Creditors should be aware that debtors may use this change as the basis for arguing that any collateral acquired after July 1, 2013, is not covered by the financing statement unless it is amended to include the debtor’s name as it appears on the debtor’s driver’s license. Creditors should be aware that this could create problems if they ever need to foreclose on collateral. Some creditors are considering amending their financing statement within 120 days of July 1, 2013, to absolutely avoid any potential litigation over the debtor’s name, though it is not clear that this step is necessary.
As always, a creditor should consult with its attorney with any questions regarding financing statements, or perfection in general. There can be many nuanced issues that arise when dealing with perfection and liens on collateral, and creditors should make sure that there are no issues with a specific transaction.
Practice Area Categories: Banking Law