SB1692 97TH GENERAL ASSEMBLY

LRB097 06688 AEK 46774 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB1692

Introduced 2/9/2011, by Sen. A. J. Wilhelmi

SYNOPSIS AS INTRODUCED:

810 ILCS 5/9-501.1 new
810 ILCS 5/9-510
810 ILCS 5/9-516

Amends the Uniform Commercial Code. Provides that no person shall file a fraudulent financing statement and assigns civil and criminal penalties for such filings. Provides a procedure for filing a form affidavit to provide notice of a fraudulent financing statement or amendment and provides guidance for when the Secretary of State may terminate the financing statement or amendment based on the affidavit. Provides that a filing office may terminate a record under specified circumstances with notice to the filer of the financing statement or amendment. Provides several circumstances where effective filing does not occur. Effective immediately.

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Uniform Commercial Code is amended by changing Sections 9-510 and 9-516 and by adding Section 9-501.1 as follows:

(810 ILCS 5/9-501.1 new)

Sec. 9-501.1. Fraudulent financing statements and amendments.

(a) No person shall cause to be presented for filing a financing statement or amendment that the person knows or reasonably should know:

(1) is not related to a valid lien, a valid security agreement, or a judgment of a court of competent jurisdiction;

(2) is for an improper purpose or purposes, such as to harass, hinder, defraud, or otherwise interfere with any person; or

(3) contains materially false or misleading information.

(b) A person who submits or is responsible for submitting any financing statement or amendment in violation of subsection (a) is guilty of a Class A misdemeanor and a Class 4 felony for a second or subsequent offense.

(c) A person who violates subsection (a) shall be liable to each injured person for:

(1) the greater of nominal damages up to $10,000 or the actual damages caused by the violation;

(2) reasonable attorney fees;

(3) court costs and other related expenses of bringing an action, including investigative expenses; and

(4) exemplary damages in an amount determined by the court.

(d) The Secretary of State shall adopt and make available a form affidavit to provide notice of a fraudulent financing statement or amendment. A person identified as a debtor in a financing statement or amendment filed with the Secretary of State may file such fraudulent filing affidavit under penalty of perjury with the Secretary of State.

A person shall not file an affidavit under this Section with respect to a financing statement or amendment filed by a regulated financial institution or a representative of a regulated financial institution.

(e) Upon receipt of an affidavit filed under this Section, or upon administrative action by the Secretary, the Secretary of State shall request from the filer of the financing statement or amendment additional documentation supporting the filing. The Department of Business Services of the Office of the Secretary of State and the Office of the General Counsel shall review all such documentation received within 30 days of receipt. The Secretary of State may terminate the financing statement or amendment effective 30 days from the date of notice if it has a reasonable basis for concluding that:

(1) the record is materially false or fraudulent;

(2) the record was filed for the purpose of harassing any person;

(3) the record asserts a claim against a current or former employee or officer of a federal, State, county, or other local governmental unit that relates to the performance of the officer's or employee's public duties and for which the filer does not hold a properly executed security agreement or judgment from a court of competent jurisdiction;

(4) in the case of a record submitted to the filing office described in Section 9-501(b), the debtor does not meet the definition of a transmitting utility as described in Section 9-102(a)(80);

(5) in the case of a record submitted to the filing office described in Section 9-501(a), the transaction does not meet the definition of a manufactured-home transaction as described in Section 9-102(a)(54); or

(6) in the case of a record submitted to the filing office described in Section 9-501(a), the transaction does not meet the definition of a public-finance transaction as described in Section 9-102(a)(67).

(f) The Secretary of State shall not charge a fee to file an affidavit under this Section. The Secretary of State shall not return any filing fee paid for filing a financing statement or amendment, regardless of whether the financing statement or amendment is terminated under this Section.

(g) The Secretary of State shall send notice of the termination of a financing statement or an amendment under subsection (e) to the filer of the financing statement or amendment advising the filer that the financing statement or amendment has been terminated. If the filer believes in good faith that the statement or amendment was legally filed and is not fraudulent, the filer may file an action to reinstate the financing statement or amendment.

(h) If a court or tribunal in an action under this Section determines that the financing statement or amendment should be reinstated or accepted, the court or tribunal shall provide a copy of its order to the Secretary of State. On receipt of an order reinstating a financing statement or an amendment, the Secretary of State shall file a record that identifies by its file number the initial financing statement or amendment to which the record relates and indicates that the financing statement or amendment has been reinstated.

(i) On the filing of a record reinstating a financing statement or an amendment under subsection (h), the financing statement or amendment is effective as a filed record from the initial filing date. If a financing statement that is reinstated would have lapsed during the period of termination, the secured party may file a continuation statement within 30 days after the record reinstating the financing statement is filed. The continuation statement is effective as a filed record from the date the financing statement would have lapsed. However, a financing or continuation statement or amendment is not retroactive as provided in this subsection as against a purchaser of the collateral that gives value in reasonable reliance on the absence of the record from the files.

(j) Neither the filing office nor any of its employees incur liability for the termination of a record under this Section, the refusal to accept a record for filing under Section 9-516, or the failure to terminate a record or to refuse to accept a record for filing in the lawful performance of its duties.

(k) As used in this Section, the term "regulated financial institution" means a financial institution subject to regulatory oversight or examination by a State or federal agency and includes banks, savings banks, savings associations, building and loan associations, credit unions, consumer finance companies, industrial banks, industrial loan companies, insurance companies, investment companies, installment sellers, mortgage servicers, sales finance companies, and leasing companies.

(810 ILCS 5/9-510)

Sec. 9-510. Effectiveness of filed record.

(a) Filed record effective if authorized. A filed record is effective only to the extent that it was filed by a person that may file it under Section 9-509.

(b) Authorization by one secured party of record. A record authorized by one secured party of record does not affect the financing statement with respect to another secured party of record.

(c) Continuation statement not timely filed. A continuation statement that is not filed within the six-month period prescribed by Section 9-515(d) is ineffective.

(d) A filed record ceases to be effective if the filing office terminates the record pursuant to Section 9-501.1.

(Source: P.A. 91-893, eff. 7-1-01.)

(810 ILCS 5/9-516)

Sec. 9-516. What constitutes filing; effectiveness of filing.

(a) What constitutes filing. Except as otherwise provided in subsection (b), communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.

(b) Refusal to accept record; filing does not occur. Filing does not occur with respect to a record that a filing office refuses to accept because:

(1) the record is not communicated by a method or medium of communication authorized by the filing office;

(2) an amount equal to or greater than the applicable filing fee is not tendered;

(3) the filing office is unable to index the record because:

(A) in the case of an initial financing statement, the record does not provide a name for the debtor;

(B) in the case of an amendment or correction statement, the record:

(i) does not identify the initial financing statement as required by Section 9-512 or 9-518, as applicable; or

(ii) identifies an initial financing statement whose effectiveness has lapsed under Section 9-515;

(C) in the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor's last name;

(D) in the case of a record filed or recorded in the filing office described in Section 9-501(a)(1), the record does not provide a sufficient description of the real property to which it relates; or

(E) in the case of a record submitted to the filing office described in Section 9-501(b), the debtor does not meet the definition of a transmitting utility as described in Section 9-102(a)(80);

(F) in the case of a record submitted to the filing office described in Section 9-501(a), the transaction does not meet the definition of a manufactured home transaction as described in Section 9-102(a)(54);

(G) in the case of a record submitted to the filing office described in Section 9-501(a), the transaction does not meet the definition of a public-finance transaction as described in Section 9-102(a)(67);

(3.5) in the case of an initial financing statement or an amendment, if the filing office believes in good faith that a document submitted for filing is materially false or fraudulent or is being filed for the purpose of harassing any person or asserts a claim against a current or former employee or officer of a federal, State, county, or other local governmental unit that relates to the performance of the officer's or employee's public duties and for which the filer does not hold a properly executed security agreement or judgment from a court of competent jurisdiction being filed for the purpose of defrauding any person or harassing any person in the performance of duties as a public servant;

(4) in the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;

(5) in the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:

(A) provide a mailing address for the debtor;

(B) indicate whether the debtor is an individual or an organization; or

(C) if the financing statement indicates that the debtor is an organization, provide:

(i) a type of organization for the debtor;

(ii) a jurisdiction of organization for the debtor; or

(iii) an organizational identification number for the debtor or indicate that the debtor has none;

(6) in the case of an assignment reflected in an initial financing statement under Section 9-514(a) or an amendment filed under Section 9-514(b), the record does not provide a name and mailing address for the assignee; or

(7) in the case of a continuation statement, the record is not filed within the six-month period prescribed by Section 9-515(d).

(c) Rules applicable to subsection (b). For purposes of subsection (b):

(1) a record does not provide information if the filing office is unable to read or decipher the information; and

(2) a record that does not indicate that it is an amendment or identify an initial financing statement to which it relates, as required by Section 9-512, 9-514, or 9-518, is an initial financing statement.

(d) Refusal to accept record; record effective as filed record. A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b), is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.

(e) The Secretary of State may refuse to accept a record for filing under subdivision (b)(3)(E) or (b)(3.5) only if the refusal is approved by the Department of Business Services of the Secretary of State and the General Counsel to the Secretary of State.

(Source: P.A. 95-446, eff. 1-1-08.)

Section 99. Effective date. This Act takes effect upon becoming law.