Is it Jackie, Jaqueline or Jaclynn? Amendments to Article 9 of the Uniform Commercial Code, effective July 1, 2013, help provide the answer. Suppose Jackie Peterson, a Minnesota resident, has decided to take out a loan for her new bakery, which she will operate as a sole proprietor, and granted the lender a security interest in her commercial mixer as collateral to support the loan. The lender is going to file a financing statement and asks Jackie to provide her name. Jackie says that her name is spelled “Jackie Peterson” but also provides the lender with her birth certificate and driver’s license. Jackie’s birth certificate states her name is Jaqueline Susan Peterson, and her Minnesota driver’s license states her name is Jaclynn Susan Peterson. The lender lets out a small sigh as she remembers that the current UCC does not define “name of the debtor,” and is confused about what name to enter on the financing statement.
The State of Minnesota, like many other states, has adopted certain revisions to Article 9 of the UCC which provide, among other things, further guidance on what the “name of the debtor” means. Minnesota’s revised Section 9-503 that becomes effective July 1, 2013, provides that a name of a debtor is sufficient “… if a debtor is an individual to whom this state has issued a driver’s license or state identification card that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver’s license or state identification card.” This rule is commonly known as the “only-if” rule (or, “Alternative A”) because the individual debtor’s name as listed on the filed financing statement will be sufficient only if it matches the name listed on the debtor’s driver’s license. Once this provision goes into effect in Minnesota, the lender in the above scenario would need to list Jaclynn Susan Peterson as the debtor’s name on the financing statement (so long as the driver’s license has not expired and was issued by the State of Minnesota). If the individual debtor does not have a current Minnesota driver’s license or state identification card, then the financing statement must provide the individual name of the debtor or the surname and first personal name of the debtor. This rule will leave the lender in the above example in the same predicament as under current Article 9.
Some states, e.g., Colorado and Wyoming, have adopted a different approach (known either as “Alternative B” or the “safe harbor” approach), which generally provides that a debtor’s name on the financing statement will be sufficient if it satisfies any of the following: “(a) it provides the individual name of the debtor, (b) it provides the surname and first personal name of the debtor, or (c) … it provides the name of the individual which is indicated on a [driver’s license] that this State has issued to the individual and which is not expired.” None of the Midwest states have adopted Alternative B. However, when preparing a financing statement, lenders will need to keep the location of the debtor in mind to make sure that the debtor’s name is sufficient.
The revisions to Article 9 of the UCC also provide a number of other changes related to filing, including changes to the definition of “Registered Organization” and clarification of what to use as the debtor’s name when collateral is held in a trust.
Lenders should take note of revisions to Article 9 that become effective July 1, 2013. For example, secured parties will have until November 1, 2013, to amend a filing against an individual debtor that does not comply with the revisions to Article 9 of the UCC.