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.


LRB097 06688 AEK 46774 b

 

 

A BILL FOR

 

SB1692LRB097 06688 AEK 46774 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 financing statements and
9amendments.
10    (a) No person shall cause to be presented for filing a
11financing statement or amendment that the person knows or
12reasonably should know:
13        (1) is not related to a valid lien, a valid security
14    agreement, or a judgment of a court of competent
15    jurisdiction;
16        (2) is for an improper purpose or purposes, such as to
17    harass, hinder, defraud, or otherwise interfere with any
18    person; or
19        (3) contains materially false or misleading
20    information.
21    (b) A person who submits or is responsible for submitting
22any financing statement or amendment in violation of subsection
23(a) is guilty of a Class A misdemeanor and a Class 4 felony for

 

 

SB1692- 2 -LRB097 06688 AEK 46774 b

1a second or subsequent offense.
2    (c) A person who violates subsection (a) shall be liable to
3each injured person for:
4        (1) the greater of nominal damages up to $10,000 or the
5    actual damages caused by the violation;
6        (2) reasonable attorney fees;
7        (3) court costs and other related expenses of bringing
8    an action, including investigative expenses; and
9        (4) exemplary damages in an amount determined by the
10    court.
11    (d) The Secretary of State shall adopt and make available a
12form affidavit to provide notice of a fraudulent financing
13statement or amendment. A person identified as a debtor in a
14financing statement or amendment filed with the Secretary of
15State may file such fraudulent filing affidavit under penalty
16of perjury with the Secretary of State.
17    A person shall not file an affidavit under this Section
18with respect to a financing statement or amendment filed by a
19regulated financial institution or a representative of a
20regulated financial institution.
21    (e) Upon receipt of an affidavit filed under this Section,
22or upon administrative action by the Secretary, the Secretary
23of State shall request from the filer of the financing
24statement or amendment additional documentation supporting the
25filing. The Department of Business Services of the Office of
26the Secretary of State and the Office of the General Counsel

 

 

SB1692- 3 -LRB097 06688 AEK 46774 b

1shall review all such documentation received within 30 days of
2receipt. The Secretary of State may terminate the financing
3statement or amendment effective 30 days from the date of
4notice if it has a reasonable basis for concluding that:
5        (1) the record is materially false or fraudulent;
6        (2) the record was filed for the purpose of harassing
7    any person;
8        (3) the record asserts a claim against a current or
9    former employee or officer of a federal, State, county, or
10    other local governmental unit that relates to the
11    performance of the officer's or employee's public duties
12    and for which the filer does not hold a properly executed
13    security agreement or judgment from a court of competent
14    jurisdiction;
15        (4) in the case of a record submitted to the filing
16    office described in Section 9-501(b), the debtor does not
17    meet the definition of a transmitting utility as described
18    in Section 9-102(a)(80);
19        (5) in the case of a record submitted to the filing
20    office described in Section 9-501(a), the transaction does
21    not meet the definition of a manufactured-home transaction
22    as described in Section 9-102(a)(54); or
23        (6) in the case of a record submitted to the filing
24    office described in Section 9-501(a), the transaction does
25    not meet the definition of a public-finance transaction as
26    described in Section 9-102(a)(67).

 

 

SB1692- 4 -LRB097 06688 AEK 46774 b

1    (f) The Secretary of State shall not charge a fee to file
2an affidavit under this Section. The Secretary of State shall
3not return any filing fee paid for filing a financing statement
4or amendment, regardless of whether the financing statement or
5amendment is terminated under this Section.
6    (g) The Secretary of State shall send notice of the
7termination of a financing statement or an amendment under
8subsection (e) to the filer of the financing statement or
9amendment advising the filer that the financing statement or
10amendment has been terminated. If the filer believes in good
11faith that the statement or amendment was legally filed and is
12not fraudulent, the filer may file an action to reinstate the
13financing statement or amendment.
14    (h) If a court or tribunal in an action under this Section
15determines that the financing statement or amendment should be
16reinstated or accepted, the court or tribunal shall provide a
17copy of its order to the Secretary of State. On receipt of an
18order reinstating a financing statement or an amendment, the
19Secretary of State shall file a record that identifies by its
20file number the initial financing statement or amendment to
21which the record relates and indicates that the financing
22statement or amendment has been reinstated.
23    (i) On the filing of a record reinstating a financing
24statement or an amendment under subsection (h), the financing
25statement or amendment is effective as a filed record from the
26initial filing date. If a financing statement that is

 

 

SB1692- 5 -LRB097 06688 AEK 46774 b

1reinstated would have lapsed during the period of termination,
2the secured party may file a continuation statement within 30
3days after the record reinstating the financing statement is
4filed. The continuation statement is effective as a filed
5record from the date the financing statement would have lapsed.
6However, a financing or continuation statement or amendment is
7not retroactive as provided in this subsection as against a
8purchaser of the collateral that gives value in reasonable
9reliance on the absence of the record from the files.
10    (j) Neither the filing office nor any of its employees
11incur liability for the termination of a record under this
12Section, the refusal to accept a record for filing under
13Section 9-516, or the failure to terminate a record or to
14refuse to accept a record for filing in the lawful performance
15of its duties.
16    (k) As used in this Section, the term "regulated financial
17institution" means a financial institution subject to
18regulatory oversight or examination by a State or federal
19agency and includes banks, savings banks, savings
20associations, building and loan associations, credit unions,
21consumer finance companies, industrial banks, industrial loan
22companies, insurance companies, investment companies,
23installment sellers, mortgage servicers, sales finance
24companies, and leasing companies.
 
25    (810 ILCS 5/9-510)

 

 

SB1692- 6 -LRB097 06688 AEK 46774 b

1    Sec. 9-510. Effectiveness of filed record.
2    (a) Filed record effective if authorized. A filed record is
3effective only to the extent that it was filed by a person that
4may file it under Section 9-509.
5    (b) Authorization by one secured party of record. A record
6authorized by one secured party of record does not affect the
7financing statement with respect to another secured party of
8record.
9    (c) Continuation statement not timely filed. A
10continuation statement that is not filed within the six-month
11period prescribed by Section 9-515(d) is ineffective.
12    (d) A filed record ceases to be effective if the filing
13office terminates the record pursuant to Section 9-501.1.
14(Source: P.A. 91-893, eff. 7-1-01.)
 
15    (810 ILCS 5/9-516)
16    Sec. 9-516. What constitutes filing; effectiveness of
17filing.
18    (a) What constitutes filing. Except as otherwise provided
19in subsection (b), communication of a record to a filing office
20and tender of the filing fee or acceptance of the record by the
21filing office constitutes filing.
22    (b) Refusal to accept record; filing does not occur. Filing
23does not occur with respect to a record that a filing office
24refuses to accept because:
25        (1) the record is not communicated by a method or

 

 

SB1692- 7 -LRB097 06688 AEK 46774 b

1    medium of communication authorized by the filing office;
2        (2) an amount equal to or greater than the applicable
3    filing fee is not tendered;
4        (3) the filing office is unable to index the record
5    because:
6            (A) in the case of an initial financing statement,
7        the record does not provide a name for the debtor;
8            (B) in the case of an amendment or correction
9        statement, the record:
10                (i) does not identify the initial financing
11            statement as required by Section 9-512 or 9-518, as
12            applicable; or
13                (ii) identifies an initial financing statement
14            whose effectiveness has lapsed under Section
15            9-515;
16            (C) in the case of an initial financing statement
17        that provides the name of a debtor identified as an
18        individual or an amendment that provides a name of a
19        debtor identified as an individual which was not
20        previously provided in the financing statement to
21        which the record relates, the record does not identify
22        the debtor's last name;
23            (D) in the case of a record filed or recorded in
24        the filing office described in Section 9-501(a)(1),
25        the record does not provide a sufficient description of
26        the real property to which it relates; or

 

 

SB1692- 8 -LRB097 06688 AEK 46774 b

1            (E) in the case of a record submitted to the filing
2        office described in Section 9-501(b), the debtor does
3        not meet the definition of a transmitting utility as
4        described in Section 9-102(a)(80);
5            (F) in the case of a record submitted to the filing
6        office described in Section 9-501(a), the transaction
7        does not meet the definition of a manufactured home
8        transaction as described in Section 9-102(a)(54);
9            (G) in the case of a record submitted to the filing
10        office described in Section 9-501(a), the transaction
11        does not meet the definition of a public-finance
12        transaction as described in Section 9-102(a)(67);
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 a document submitted for filing is materially false or
16    fraudulent or is being filed for the purpose of harassing
17    any person or asserts a claim against a current or former
18    employee or officer of a federal, State, county, or other
19    local governmental unit that relates to the performance of
20    the officer's or employee's public duties and for which the
21    filer does not hold a properly executed security agreement
22    or judgment from a court of competent jurisdiction being
23    filed for the purpose of defrauding any person or harassing
24    any person in the performance of duties as a public
25    servant;
26        (4) in the case of an initial financing statement or an

 

 

SB1692- 9 -LRB097 06688 AEK 46774 b

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

 

 

SB1692- 10 -LRB097 06688 AEK 46774 b

1subsection (b):
2        (1) a record does not provide information if the filing
3    office is unable to read or decipher the information; and
4        (2) a record that does not indicate that it is an
5    amendment or identify an initial financing statement to
6    which it relates, as required by Section 9-512, 9-514, or
7    9-518, is an initial financing statement.
8    (d) Refusal to accept record; record effective as filed
9record. A record that is communicated to the filing office with
10tender of the filing fee, but which the filing office refuses
11to accept for a reason other than one set forth in subsection
12(b), is effective as a filed record except as against a
13purchaser of the collateral which gives value in reasonable
14reliance upon the absence of the record from the files.
15    (e) The Secretary of State may refuse to accept a record
16for filing under subdivision (b)(3)(E) or (b)(3.5) only if the
17refusal is approved by the Department of Business Services of
18the Secretary of State and the General Counsel to the Secretary
19of State.
20(Source: P.A. 95-446, eff. 1-1-08.)
 
21    Section 99. Effective date. This Act takes effect upon
22becoming law.