HB5190 EngrossedLRB097 16765 JLS 62044 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Uniform Commercial Code is amended by
5changing Sections 9-510 and 9-516 and by adding Section 9-501.1
6as follows:
 
7    (810 ILCS 5/9-501.1 new)
8    Sec. 9-501.1. Fraudulent records.
9    (a) No person shall cause to be communicated to the filing
10office for filing a false record the person knows or reasonably
11should know:
12        (1) is not authorized or permitted under Section 9-509,
13    9-708, or 9-808 of this Article;
14        (2) is not related to a valid existing or potential
15    commercial or financial transaction, an existing
16    agricultural or other lien, or a judgment of a court of
17    competent jurisdiction; and
18        (3) is filed with the intent to harass or defraud the
19    person identified as debtor in the record or any other
20    person.
21    (b) A person who violates subsection (a) is guilty of a
22Class A misdemeanor for a first offense and a Class 4 felony
23for a second or subsequent offense.

 

 

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1    (c) A person who violates subsection (a) shall be liable in
2a civil action to each injured person for:
3        (1) the greater of the actual damages caused by the
4    violation or up to $10,000 in lieu of actual damages;
5        (2) reasonable attorney's fees;
6        (3) court costs and other related expenses of bringing
7    an action, including reasonable investigative expenses;
8    and
9        (4) in the discretion of the court, exemplary damages
10    in an amount determined by the court or jury.
11    (d) A person identified as debtor in a filed record the
12person believes was caused to be communicated to the filing
13office in violation of subsection (a) may, under penalty of
14perjury, file with the Secretary of State an affidavit to that
15effect. The Secretary of State shall adopt and make available a
16form affidavit for use under this Section.
17    (e) Upon receipt of an affidavit filed under this Section,
18or upon administrative action by the Secretary of State, the
19Secretary of State shall communicate to the secured party of
20record on the record to which the affidavit or administrative
21action relates and to the person that communicated the record
22to the filing office, if different and known to the office, a
23request for additional documentation supporting the
24effectiveness of the record. The Department of Business
25Services of the Office of the Secretary of State and the Office
26of the General Counsel shall review all such documentation

 

 

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1received within 30 days after the first request for additional
2documentation is sent. The Secretary of State may terminate the
3record effective 30 days after the first request for additional
4documentation is sent if it has a reasonable basis for
5concluding that the record was communicated to the filing
6office in violation of subsection (a).
7    The Secretary of State may initiate an administrative
8action under the first paragraph of this subsection (e) with
9regard to a filed record if it has reason to believe, from
10information contained in the record or obtained from the person
11that communicated the record to the filing office, that the
12record was communicated to the filing office in violation of
13subsection (a). The Secretary of State may give heightened
14scrutiny to a record that indicates that the debtor is a
15transmitting utility or that indicates that the transaction to
16which the record relates is a manufactured-home transaction or
17a public-finance transaction.
18    (f) The Secretary of State shall not charge a fee to file
19an affidavit under this Section and shall not return any fee
20paid for filing a record terminated under this Section.
21    (g) The Secretary of State shall promptly communicate to
22the secured party of record a notice of the termination of a
23record under subsection (e). A secured party of record that
24believes in good faith that the record was not communicated to
25the filing office in violation of subsection (a) may file an
26action to require that the record be reinstated by the filing

 

 

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1office. A person that communicated a record to the filing
2office that the filing office rejected in reliance on Section
39-516(b)(3.5), who believes in good faith that the record was
4not communicated to the filing office in violation of Section
59-516(b)(3.5), may file an action to require that the record be
6accepted by the filing office.
7    (h) If a court or tribunal in an action under this Section
8determines that a record terminated under this Section or
9rejected in reliance on Section 9-516(b)(3.5) should be
10reinstated or accepted, the court or tribunal shall provide a
11copy of its order to that effect to the Secretary of State. On
12receipt of an order reinstating a terminated record, the
13Secretary of State shall refile the record along with a notice
14indicating that the record was refiled pursuant to this Section
15and its initial filing date. On receipt of an order requiring
16that a rejected record be accepted, the Secretary of State
17shall promptly file the record along with a notice indicating
18that the record was filed pursuant to this Section and the date
19on which it was communicated for filing. A rejected record that
20is filed pursuant to an order of a court or tribunal shall have
21the effect described in Section 9-516(d) for a record the
22filing office refuses to accept for a reason other than one set
23forth in Section 9-516(b).
24    (i) A terminated record that is refiled under subsection
25(h) is effective as a filed record from the initial filing
26date. If the period of effectiveness of a refiled record would

 

 

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1have lapsed during the period of termination, the secured party
2may file a continuation statement within 30 days after the
3record is refiled and the continuation statement shall have the
4same effect as if it had been filed during the 6-month period
5described in Section 9-515(d). A refiled record shall be
6considered never to have been ineffective against all persons
7and for all purposes except that it shall not be effective as
8against a purchaser of the collateral that gave value in
9reasonable reliance on the absence of the record from the
10files.
11    (j) Neither the filing office nor any of its employees
12shall incur liability for the termination or failure to
13terminate a record under this Section or for the refusal to
14accept a record for filing in the lawful performance of the
15duties of the office or employee.
16    (k) This Section does not apply to a record communicated to
17the filing office by a regulated financial institution or by a
18representative of a regulated financial institution except
19that the Secretary of State may request from the secured party
20of record on the record or from the person that communicated
21the record to the filing office, if different and known to the
22office, additional documentation supporting that the record
23was communicated to the filing office by a regulated financial
24institution or by a representative of a regulated financial
25institution. The term "regulated financial institution" means
26a financial institution subject to regulatory oversight or

 

 

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1examination by a State or federal agency and includes banks,
2savings banks, savings associations, building and loan
3associations, credit unions, consumer finance companies,
4industrial banks, industrial loan companies, insurance
5companies, investment companies, investment funds, installment
6sellers, mortgage servicers, sales finance companies, and
7leasing companies.
8    (l) If a record was communicated to the filing office for
9filing before the effective date of this Section and its
10communication would have constituted a violation of subsection
11(a) if it had occurred on or after the effective date of the
12Section: (i) subsections (b) and (c) are not applicable; and
13(ii) the other subsections of this Section are applicable.
 
14    (810 ILCS 5/9-510)
15    Sec. 9-510. Effectiveness of filed record.
16    (a) Filed record effective if authorized. A filed record is
17effective only to the extent that it was filed by a person that
18may file it under Section 9-509.
19    (b) Authorization by one secured party of record. A record
20authorized by one secured party of record does not affect the
21financing statement with respect to another secured party of
22record.
23    (c) Continuation statement not timely filed. A
24continuation statement that is not filed within the six-month
25period prescribed by Section 9-515(d) is ineffective.

 

 

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1    (d) A filed record ceases to be effective if the filing
2office terminates the record pursuant to Section 9-501.1.
3(Source: P.A. 91-893, eff. 7-1-01.)
 
4    (810 ILCS 5/9-516)
5    Sec. 9-516. What constitutes filing; effectiveness of
6filing.
7    (a) What constitutes filing. Except as otherwise provided
8in subsection (b), communication of a record to a filing office
9and tender of the filing fee or acceptance of the record by the
10filing office constitutes filing.
11    (b) Refusal to accept record; filing does not occur. Filing
12does not occur with respect to a record that a filing office
13refuses to accept because:
14        (1) the record is not communicated by a method or
15    medium of communication authorized by the filing office;
16        (2) an amount equal to or greater than the applicable
17    filing fee is not tendered;
18        (3) the filing office is unable to index the record
19    because:
20            (A) in the case of an initial financing statement,
21        the record does not provide a name for the debtor;
22            (B) in the case of an amendment or correction
23        statement, the record:
24                (i) does not identify the initial financing
25            statement as required by Section 9-512 or 9-518, as

 

 

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1            applicable; or
2                (ii) identifies an initial financing statement
3            whose effectiveness has lapsed under Section
4            9-515; or
5                (iii) identifies an initial financing
6            statement which was terminated pursuant to Section
7            9-501.1;
8            (C) in the case of an initial financing statement
9        that provides the name of a debtor identified as an
10        individual or an amendment that provides a name of a
11        debtor identified as an individual which was not
12        previously provided in the financing statement to
13        which the record relates, the record does not identify
14        the debtor's last name;
15            (D) in the case of a record filed or recorded in
16        the filing office described in Section 9-501(a)(1),
17        the record does not provide a sufficient description of
18        the real property to which it relates; or
19            (E) in the case of a record submitted to the filing
20        office described in Section 9-501(a)(1), the filing
21        office has reason to believe, from information
22        contained in the record or from the person that
23        communicated the record to the office, that: (i) if the
24        record indicates that the debtor is a transmitting
25        utility, the debtor does not meet the definition of a
26        transmitting utility as described in Section

 

 

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1        9-102(a)(81); (ii) if the record indicates that the
2        transaction relating to the record is a
3        manufactured-home transaction, the transaction does
4        not meet the definition of a manufactured-home
5        transaction as described in Section 9-102(a)(54); or
6        (iii) if the record indicates that the transaction
7        relating to the record is a public-finance
8        transaction, the transaction does not meet the
9        definition of a public-finance transaction as
10        described in Section 9-102(a)(67); 9-501(b), the
11        debtor does not meet the definition of a transmitting
12        utility as described in Section 9-102(a)(80);
13        (3.5) in the case of an initial financing statement or
14    an amendment, if the filing office believes in good faith
15    that the record was communicated to the filing office in
16    violation of Section 9-501.1(a); a document submitted for
17    filing is being filed for the purpose of defrauding any
18    person or harassing any person in the performance of duties
19    as a public servant;
20        (4) in the case of an initial financing statement or an
21    amendment that adds a secured party of record, the record
22    does not provide a name and mailing address for the secured
23    party of record;
24        (5) in the case of an initial financing statement or an
25    amendment that provides a name of a debtor which was not
26    previously provided in the financing statement to which the

 

 

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1    amendment relates, the record does not:
2            (A) provide a mailing address for the debtor;
3            (B) indicate whether the debtor is an individual or
4        an organization; or
5            (C) if the financing statement indicates that the
6        debtor is an organization, provide:
7                (i) a type of organization for the debtor;
8                (ii) a jurisdiction of organization for the
9            debtor; or
10                (iii) an organizational identification number
11            for the debtor or indicate that the debtor has
12            none;
13        (6) in the case of an assignment reflected in an
14    initial financing statement under Section 9-514(a) or an
15    amendment filed under Section 9-514(b), the record does not
16    provide a name and mailing address for the assignee; or
17        (7) in the case of a continuation statement, the record
18    is not filed within the six-month period prescribed by
19    Section 9-515(d).
20    (c) Rules applicable to subsection (b). For purposes of
21subsection (b):
22        (1) a record does not provide information if the filing
23    office is unable to read or decipher the information; and
24        (2) a record that does not indicate that it is an
25    amendment or identify an initial financing statement to
26    which it relates, as required by Section 9-512, 9-514, or

 

 

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1    9-518, is an initial financing statement.
2    (d) Refusal to accept record; record effective as filed
3record. A record that is communicated to the filing office with
4tender of the filing fee, but which the filing office refuses
5to accept for a reason other than one set forth in subsection
6(b), is effective as a filed record except as against a
7purchaser of the collateral which gives value in reasonable
8reliance upon the absence of the record from the files.
9    (e) The Secretary of State may refuse to accept a record
10for filing under subdivision (b)(3)(E) or (b)(3.5) only if the
11refusal is approved by the Department of Business Services of
12the Secretary of State and the General Counsel to the Secretary
13of State.
14(Source: P.A. 95-446, eff. 1-1-08.)
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.