Driving Toward Certainty In UCC Financing Statements: Why Alternative A In The 2010 Amendments To UCC § 9-503(a)(4) Is The Best Rule For Listing Individual Debtor Names

In 2010, the sponsors of the Uniform Commercial Code (“UCC”) approved certain amendments (the “2010 Amendments”) to UCC Article 9, which deals with secured transactions.  Chief among the 2010 Amendments was a change to § 9-503(a)(4), which concerns how the names of individual debtors are to be listed on UCC financing statements that creditors file to perfect their security interests in a debtor’s collateral for a secured loan.  Prior to the 2010 Amendments, which became effective in most U.S. States in July 2013, parties to secured transactions were sometimes uncertain as to how a particular individual debtor’s name was required to be listed under § 9-503(a)(4).  That uncertainty, in turn, occasionally resulted in a creditor failing to receive a security interest it had bargained for—and thought it had gotten. To remedy those problems, the 2010 Amendments included two alternative amendments to the individual-debtor-name rule under § 9-503(a)(4)—“Alternative A” and “Alternative B”—and left it to each State to decide which alternative to enact.  This Article discusses why Alternative A (which requires an individual debtor’s name on a financing statement to match the name on his or her driver’s license) provides the best way to remove the ambiguities that existed under the prior version of § 9-503(a)(4). The Article further explains how sub-rules within Alternative B essentially repeat the same vague standard for listing individual debtor names that existed under the “old” rule, and why Alternative B therefore perpetuates the very risks to creditors who make secured loans to individuals that the 2010 Amendments were intended to eliminate.  The Article argues that, if and when such risks under Alternative B begin to cause harm to secured creditors, lawmakers in States that have adopted Alternative B (as well as the UCC’s sponsors themselves) should consider a switch to Alternative A.  In the meantime, the Article offers suggestions as to how secured parties can better protect against those risks when filing financing statements, or searching for previously-filed financing statements, against individual debtors in Alternative B jurisdictions.