Legislature(2013 - 2014)BELTZ 105 (TSBldg)
04/03/2013 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB83 | |
| HB69 | |
| HB9 | |
| SB65 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 65 | TELECONFERENCED | |
| + | HB 9 | TELECONFERENCED | |
| += | HB 69 | TELECONFERENCED | |
| += | HB 83 | TELECONFERENCED | |
HB 9-SECURED TRANSACTIONS AND FUNDS TRANSFERS
2:00:07 PM
CHAIR COGHILL announced the consideration of HB 9. "An Act
relating to secured transactions under the Uniform Commercial
Code and to the regulation of funds transfers, including
remittance transfers, under the Uniform Commercial Code and
federal law; and providing for an effective date."
2:01:14 PM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, sponsor
of HB 9, stated that this legislation is important and time
sensitive, because July 1, 2013 is a nationwide effective date.
The bill updates two articles of the Uniform Commercial Code
(UCC). These are Article 9 on secure transactions and Article 4A
on funds transfer. He reported no opposition to the bill.
2:03:21 PM
DEBORAH BEHR, Chief Assistant Attorney General, Legislation and
Regulation Section, Civil Division, Department of Law, and
Chair, Alaska Uniform Law Delegations, National Conference of
Commissioners on Uniform State Laws (NCCUSL), Juneau, Alaska,
said the Alaska statutes assigned DOL the duty of promoting
uniform laws in Alaska where uniformity among the states is
important. The state has been a member of the Uniform Law
Commission for over 100 years. She described the Uniform Law
Commission as a states' rights organization, in which states
meet annually to propose uniform solutions to state legislatures
to address common problems where uniformity across state lines
is desirable. One area is commerce.
Because businesses buy and sell products and borrow money across
state lines, all the states have adopted the Uniform Commercial
Code (UCC) to ensure reliability and predictability of business
transactions. The purpose of the bill is to update two articles
of the UCC. These pertain to Article 9 on secure transactions
and Article 4A on funds transfer.
She highlighted four major changes and provided examples. The
first amendment to Article 9 deals with misspellings of names.
She explained that she and her husband are in the process of
buying a car. As part of the process, they got a loan and gave
the creditor a security interest in the car in the event of
default. The UCC commissioners have found that names are
sometimes misspelled in these documents and this makes it
difficult for the creditor to recover the asset - the car in
this example. To address this problem the UCC has recommended
that all states create a safe harbor for creditors if they look
at the person's current driver's license or state ID card. This
is a protection to the consumer as well.
MS. BEHR said the second update to Article 9 makes changes to
the definition of "registered organization." For example, if she
were to obtain a loan to start a small business in Anchorage
called Behr's Bikes to sell bikes in Alaska, Washington, and
Oregon there would be a question about where the security
agreement would be filed. This update says that the date and
location where the business was formed determines where those
documents will be filed. In this example it would be in Alaska.
The third update to Article 9 relates to "after acquired
property." Using the same example of Behr's Bikes in Anchorage,
she hypothesized that she moved the business to Arizona,
purchased additional merchandise, but kept the same loan. The
legal issue that arises in this circumstance is where the
creditor would look for that security agreement. This amendment
says that the creditor may rely on the filing in Alaska for four
months. She noted that 36 states have adopted these three
changes and they're pending in 13 more jurisdictions.
MS. BEHR said the final changes relate to remittance transfers
in UCC Article 4A. She noted a letter of support in the packets
from the Alaska Bankers Association and explained that it's
often unclear whether these electronic transfers are covered by
state or federal law. The Article 4A changes have been passed by
14 jurisdictions and are pending in 21 jurisdictions. She noted
that the packets included a sectional analysis of HB 9.
SENATOR WIELECHOWSKI asked if there would be a walk-through of
the bill.
CHAIR COGHILL stated his preference to take testimony first.
2:11:02 PM
STACY SCHUBERT, Director, Government Relations and Public
Affairs, Alaska Housing Finance Corporation (AHFC), explained
that AHFC uses Article 9 of the Uniform Commercial Code in
securing some collateral when financing multifamily projects.
The collateral for things like kitchen appliances and furniture
is perfected through the recording of a UCC financing statement.
She said that HB 9 will enhance AHFC's secured position in two
ways. It will provide greater guidance as to the name of the
debtor on the financing statement and it will provide greater
protection for an existing secured creditor when the debtor
moves to another state or merges with another entity. She noted
that Mr. Havelock could answer technical questions.
CHAIR COGHILL asked where that provision was in the bill.
MS. SCHUBERT said she didn't have a copy of the bill in front of
her.
CHAIR COGHILL asked Mr. Havelock if he could identify where that
provision was in the bill.
2:13:03 PM
ERIC HAVELOCK, Multifamily Underwriting Supervisor, Alaska
Housing Finance Corporation, said that Ms. Schubert was talking
about the sections that make changes to Article 9, and
Representative Gruenberg could identify the exact location in
the bill.
2:13:42 PM
LUKE FANNING, Vice President, First National Bank Alaska, said
he was representing the Alaska Bankers Association (ABA) in
support of HB 9. It provides necessary amendments to Articles 4A
and 9 of the Uniform Commercial Code. This legislation is
necessary to address amendments made in 2010 to Article 9 of the
UCC. HB 9 also clarifies the relationship between UCC Article 4A
and the federal Electronic Funds Transfer Act. If the bill is
not passed this session, Alaska will be inconsistent with the
financial practices in the rest of the country. Failure to pass
the bill could result in additional costs and uncertainty for
Alaska businesses and financial services customers.
CHAIR COGHILL noted that Paula Kelsey from the Department of
Natural Resources (DNR) was available to answer questions.
2:16:19 PM
CHAIR COGHILL asked Ms. Behr to explain the process to get a UCC
law in place and where there was potential for modification.
MS. BEHR explained that the Uniform Law delegates meet annually
to discuss potential changes in an open process. The banking
community and consumer groups help develop the bill and then it
is recommended to state legislatures, as she is doing today. She
said it is unusual for the commissioners to recommend a
particular date, but for secure transactions it is very
important in that things happen on the same date. Almost all the
states have adopted or have this legislation pending.
CHAIR COGHILL asked where the suggested changes fit in the
articles.
MS. BEHR said they apply to Article 9 and Article 4A.
CHAIR COGHILL asked Mr. Henning if he had anything to add.
MR. HENNING explained that the Uniform Law Commission and the
American Law Institute develop the UCC articles in a deliberate,
open process, and make recommendations to the states. They are
not law. He explained that a major revision of Article 9 of the
UCC became effective in all the states on July 1, 2001. The
provisions in HB 9 are technical clarifications of those
revisions. They seek to resolve the practical problems facing
lenders and borrowers in the marketplace. He highlighted that
the legislature has the full authority to modify the UCC
recommendations embodied in HB 9, but it would put Alaska out of
step with other states.
2:22:09 PM
MS. BEHR provided the following sectional analysis of HB 9:
Sections 1 and 2 address the amendments to Article 4A to
maintain coverage under state law for certain types of
remittance transfers in commercial transactions. The banking
community supports this language.
Sections 3 through 7 update definitions in Article 9 of the
Uniform Commercial Code relating to secured transactions. Some
changes update language on electronic commerce to comply with
the Uniform Electronic Transactions Act. Others reflect updates
on certificates of title and recognize that there are
alternatives in other states. Sections 5 and 6 recognize that
there are new business organizations in Alaska and other states
that are not formed under the corporation law, but are formed
under other process of Alaska law such as limited liability
companies. If there is confusion about the official name, the
names on record with the department of commerce will be
examined.
Section 8 sets out a general test to demonstrate who owns
electronic chattel paper.
Section 9 makes a technical change and recognizes in statute
that designating a state of location of an organization or
agency includes the location of the home office.
Section 10 makes technical changes to conform to the revised
definition of certificate of title.
Section 11 relates to when a debtor changes location from one
state to another. It provides a four-month grace period for
after-move acquired collateral that current law provides for
pre-move collateral.
Sections 12 and 13 make technical changes in language to conform
to other provisions of the Uniform Commercial code, Article 9.
Section 14 addresses the priority of security creditors. These
technical changes protect the new priority rule in the bill.
Sections 15 and 16 clarify that a secured party that takes an
assignment of a payment as collateral for an obligation may use
the remedies under Article 9.
Sections 17 through 19 provide clarity on the name of the debtor
to be used in a financing statement for different types of
debtors, such as registered organizations, trusts, decedent of
estate, or individual debtors.
Section 20 makes technical changes to conform to the new rules
governing individual debtor names on financing statements.
Section 21 makes a technical change to parallel other provisions
of the section. The change is needed for ease of administration
by filing offices.
Sections 22 through 24 change the term "correction statement" to
"information statement" to avoid giving the impression that a
filing of the statement has a legal effect of correcting a
problem. The changes also allow a secured party of record to
file an information statement regarding a filed record if the
secured party believes that the person that filed the record was
not entitled to do so under Article 9. Without this change, only
a debtor could file such a statement.
Section 25 says that in order for a secured party to record an
affidavit to facilitate foreclosure on a mortgage serving as
collateral for a promissory note, the secured party must state
in the affidavit that the mortgagor is in default.
Sections 26 sets out an applicability provision for the Act.
Sections 27 through 33 set out transition provisions for the
Act.
Section 34 instructs the Department of Natural Resources (DNR)
on implementation of the Act.
Section 35 provides a savings clause for an action, case, or
proceeding commenced before July 1, 2013.
Section 36 provides an immediate effective date of these
instructions.
Section 37 provides an effective date of July 1, 2013 for the
Act. This avoids implementation issues across the states.
2:29:23 PM
MR. HENNING said that many of the provisions resolve minor
ambiguities or address definitional changes.
CHAIR COGHILL stated that he would hold HB 9 for further
consideration.