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Putting An End To The Use of The UCC-1 Financing Statement As A Weapon
Putting An End To The Use of The UCC-1 Financing Statement As A Weapon
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Legislative Action
Illinois is not the first state to propose
legislation for the fraudulent filings of UCC-1
one year, while Class 4 felonies carry a
statements. In 2004, Michigan passed legislasentence of between one and three years.7
tion imposing penalties for fraudulent filings.
Fraudulent filers are also liable in civil actions.
MCL 440.9501 Texas passed legislation in
They shall be held liable to each injured person
for: 1) the greater of the actual damages caused 2005 allowing the secretary of state (through
using the attorney general), to take action to
by the violation or up to $10,000 in lieu of
actual damages; 2) reasonable attorneys fees; 3) combat fraudulently filed UCC-1 statements.
court costs and related expenses of bringing the Section 405.022 of the Texas Government
action; 4) in the courts discretion, exemplary
Code allows the secretary of state to request
damages in an amount determined by the court
the assistance of the attorney general in deteror jury. 8
mining if the document is fraudulent before
This begs the question, how does an indifiling/recording the document. Additionally,
vidual properly bring a claim? This is addressed
the secretary of state can request additional
in the legislation as well. The individual, who
proof to determine if a lien is valid if it aphas been attacked with the fraudulent claim,
pears to be fraudulent. Any UCC-1 statemay file an affidavit with the Secretary of State
ment filed by an inmate in Texas is presumed
explaining the filing. From there, the secretary
invalid.
of state will take action by requesting additional
Some other states, which have imposed or
documentation from the filer supporting the
proposed legislation regarding fraudulent UCC
claim. The additional documentation, if submit- filings include:
ted, will be reviewed by the Department of
Minnesota: Minnesota Statute 545.05 proBusiness Services of the Office of the Secretary vides a motion procedure for obtaining judicial
of State and the Office of the General Counreview of a falsely filed financing statement.
sel within 30 days after the request. After this
Additionally, Minnesota Statute 609.7475
review, the Secretary of State may terminate the provides for criminal penalties for the fraudulent
record if it has a reasonable basis for concludfiling of a UCC-1 statement.
ing the filing was fraudulent. If the filing party
Georgia: House Bill 997 aims to make filing
believes that its filing was terminated wrongfully,
it may file an action requesting that the claim be a false lien against a public officer or employee
on account of the performance of their duty a
reinstated.9
felony.
One might think this would create chalIndiana: Senate Bill 382 was introduced in
lenges to the filing of claims by banks and other
January of 2012. The bill defines a fraudulent
financial institutions that regularly file claims.
filing and allows a court to enter an order declarHowever, this section of the proposed law does
ing the recording ineffective.
not apply to regulated financial institutions or
Kentucky: Senate Bill 97 provides remedies
their representatives.
for current and former public officials that are
This proposed change to the Illinois Unithe subject of fraudulent filings. The filing office
form Commercial Code is a great step forward
in protecting individuals from attacks individuals is also given discretion to refuse to accept a
UCC recording if it appears to be unauthorized.
like the so called sovereign citizens who file
bogus UCC-1 statements.