97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB3813

 

Introduced 2/10/2012, by Sen. Don Harmon

 

SYNOPSIS AS INTRODUCED:
 
810 ILCS 5/9-501.1 new
810 ILCS 5/9-510
810 ILCS 5/9-516

    Amends the Secured Transactions Article of the Uniform Commercial Code. Provides that a person may not cause to be presented for filing a financing statement or amendment that the person knows or reasonably should know: is not related to a valid lien, a valid security agreement, or a judgment of a court of competent jurisdiction; is for an improper purpose or purposes, such as to harass, hinder, defraud, or otherwise interfere with any person; or contains materially false or misleading information. Imposes criminal penalties for violations and civil liability to injured persons. Requires the Secretary of State to make available a form affidavit to provide notice of a fraudulent financing statement or amendment. Contains provisions regarding: filing a fraudulent filing affidavit; additional documentation supporting a filing; review of documentation; termination of a financing statement or amendment; fees; notice; reinstatement; liability; effectiveness; and other matters. Effective immediately.


LRB097 19332 JLS 64581 b

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3813LRB097 19332 JLS 64581 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:
12        (1) is not related to a valid lien, a valid security
13    agreement, or a judgment of a court of competent
14    jurisdiction;
15        (2) is for an improper purpose or purposes, such as to
16    harass, hinder, defraud, or otherwise interfere with any
17    person; or
18        (3) contains materially false or misleading
19    information.
20    (b) A person who submits or is responsible for submitting
21any financing statement or amendment in violation of subsection
22(a) is guilty of a Class A misdemeanor and a Class 4 felony for
23a second or subsequent offense.

 

 

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1    (c) A person who violates subsection (a) shall be liable to
2each injured person for:
3        (1) the greater of nominal damages up to $10,000 or the
4    actual damages caused by the violation;
5        (2) reasonable attorney fees;
6        (3) court costs and other related expenses of bringing
7    an action, including investigative expenses; and
8        (4) exemplary damages in an amount determined by the
9    court.
10    (d) The Secretary of State shall adopt and make available a
11form affidavit to provide notice of a fraudulent financing
12statement or amendment. A person identified as a debtor in a
13financing statement or amendment filed with the Secretary of
14State may file such fraudulent filing affidavit under penalty
15of perjury with the Secretary of State.
16    A person shall not file an affidavit under this Section
17with respect to a financing statement or amendment filed by a
18regulated financial institution or a representative of a
19regulated financial institution.
20    (e) Upon receipt of an affidavit filed under this Section,
21or upon administrative action by the Secretary, the Secretary
22of State shall request from the filer of the financing
23statement or amendment additional documentation supporting the
24filing. The Department of Business Services of the Office of
25the Secretary of State and the Office of the General Counsel
26shall review all such documentation received within 30 days of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        office described in Section 9-501(b), the debtor does
2        not meet the definition of a transmitting utility as
3        described in Section 9-102(a)(80);
4            (F) in the case of a record submitted to the filing
5        office described in Section 9-501(a), the transaction
6        does not meet the definition of a manufactured home
7        transaction as described in Section 9-102(a)(54);
8            (G) in the case of a record submitted to the filing
9        office described in Section 9-501(a), the transaction
10        does not meet the definition of a public-finance
11        transaction as described in Section 9-102(a)(67);
12        (3.5) in the case of an initial financing statement or
13    an amendment, if the filing office believes in good faith
14    that a document submitted for filing is materially false or
15    fraudulent or is being filed for the purpose of harassing
16    any person or asserts a claim against a current or former
17    employee or officer of a federal, State, county, or other
18    local governmental unit that relates to the performance of
19    the officer's or employee's public duties and for which the
20    filer does not hold a properly executed security agreement
21    or judgment from a court of competent jurisdiction being
22    filed for the purpose of defrauding any person or harassing
23    any person in the performance of duties as a public
24    servant;
25        (4) in the case of an initial financing statement or an
26    amendment that adds a secured party of record, the record

 

 

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

 

 

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