Bill Text: IA SF2333 | 2021-2022 | 89th General Assembly | Introduced

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Bill Title: A bill for an act relating to the uniform commercial code by providing for controllable electronic records.(Formerly SSB 3091.)

Spectrum: Committee Bill

Status: (Introduced - Dead) 2022-05-23 - Withdrawn. S.J. 880. [SF2333 Detail]

Download: Iowa-2021-SF2333-Introduced.html

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Senate File 2333 - Introduced
SENATE FILE 2333
BY COMMITTEE ON JUDICIARY
(SUCCESSOR TO SSB 3091)
(COMPANION TO HF 2445 BY
COMMITTEE ON JUDICIARY)
A BILL FOR
An Act relating to the uniform commercial code by providing for
controllable electronic records.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
CONTROLLABLE ELECTRONIC RECORDS
Section 1. NEW SECTION . 554.14101 Short title.
This Article may be cited as Uniform Commercial Code ——
Controllable Electronic Records.
Sec. 2. NEW SECTION . 554.14102 Definitions.
1. Controllable electronic record defined. In this
Article, “controllable electronic record” means a controllable
electronic record that can be subjected to control under
section 554.14105. The term does not include deposit accounts,
electronic chattel paper, electronic documents of title,
intangible money, investment property, or “transferable
records” , as defined in the federal Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. §7021(a)(1) or as
defined in the uniform electronic transactions Act, section
554.118, subsection 1.
2. Article 9 definitions applicable to this Article. The
definitions of “account debtor” , “authenticate” , “controllable
account” , “controllable payment intangible” , “deposit account” ,
“electronic chattel paper” , “intangible money” , “investment
property” , and “proceeds” in Article 9 apply to this Article.
3. Definition of value. “Value” has the meaning provided in
section 554.3303, subsection 1.
Sec. 3. NEW SECTION . 554.14103 Scope.
1. General scope of Article. This Article applies to
controllable electronic records, controllable accounts, and
controllable payment intangibles.
2. Conflict with Article 9. If there is conflict between
this Article and Article 9, Article 9 governs.
3. Applicable consumer laws and other laws. A transaction
subject to this Article is subject to any applicable rule of
law which establishes a different rule for consumers, including
as provided in chapter 537, or any other statute or regulation
of this state that regulates the rates, charges, agreements,
and practices for loans, credit sales, or other extensions of
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credit, and to any consumer protection statute or regulation.
Sec. 4. NEW SECTION . 554.14104 Rights in controllable
electronic records, controllable accounts, and controllable
payment intangibles.
1. Definition of qualifying purchaser. “Qualifying
purchaser” means a purchaser of a controllable electronic
record or an interest in the controllable electronic record
that obtains control of the controllable electronic record
for value, in good faith, and without notice of a claim of
a property right in the controllable electronic record or
a controllable account or controllable payment intangible
evidenced by the controllable electronic record.
2. Applicability of other law. Except as provided in this
section, law other than this Article determines whether a
person acquires a right in a controllable electronic record and
the right, if any, the person acquires.
3. Rights acquired by purchaser. A purchaser of a
controllable electronic record acquires all rights in the
controllable electronic record that the transferor had or had
power to transfer.
4. Purchase of limited interest. A purchaser of a limited
interest in a controllable electronic record acquires rights
only to the extent of the interest purchased.
5. Rights acquired by qualifying purchaser. In addition to
acquiring the rights of a purchaser, a qualifying purchaser
acquires its rights in the controllable electronic record and
a controllable account or controllable payment intangible
evidenced by the controllable electronic record free of a claim
of a property right in the controllable electronic record,
controllable account, or controllable payment intangible.
6. Exception for claim of property right in right to
payment, right to performance, or interest in property. Except
as provided in subsection 5 or law other than the Uniform
Commercial Code, as provided in this chapter, a qualifying
purchaser takes a right to payment, right to performance, or
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interest in property evidenced by the controllable electronic
record subject to a claim of a property right in the right to
payment, right to performance, or interest in property.
7. Rights of a purchaser of a controllable electronic
record traceable to another controllable electronic record. The
following rules apply to a purchaser of a controllable
electronic record traceable to another controllable electronic
record:
a. An action based on a claim of a property right in the
other controllable electronic record or a controllable account
or controllable payment intangible evidenced by the other
controllable electronic record, whether framed in conversion,
replevin, constructive trust, equitable lien, or other theory,
may not be asserted against the purchaser if the purchaser
acquires its interest in and obtains control of the traceable
controllable electronic record for value, in good faith, and
without notice of a claim of a property right in the traceable
controllable electronic record or a controllable account or
controllable payment intangible evidenced by the traceable
controllable electronic record.
b. The purchaser takes free of a security interest in the
traceable controllable electronic record and a controllable
account or controllable payment intangible evidenced by the
traceable controllable electronic record if:
(1) the purchaser acquires its interest in and obtains
control of the traceable controllable electronic record for
value, in good faith, and without notice of a claim of a
property right in the traceable controllable electronic record
or a controllable account or controllable payment intangible
evidenced by the traceable controllable electronic record; and
(2) the traceable controllable electronic record
constitutes proceeds of the other controllable electronic
record.
8. Filing not notice. Filing of a financing statement under
Article 9 is not notice of a claim of a property interest in a
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controllable electronic record.
Sec. 5. NEW SECTION . 554.14105 Control of controllable
electronic record.
1. Requirements for control. A person has control of a
controllable electronic record if:
a. the controllable electronic record, a record attached
to or logically associated with the controllable electronic
record, or the system in which the controllable electronic
record is recorded, if any, gives the person:
(1) the power to avail itself of substantially all the
benefit from the controllable electronic record; and
(2) subject to subsection 2, the exclusive power to:
(a) prevent others from availing themselves of
substantially all the benefit from the controllable electronic
record; and
(b) transfer control of the controllable electronic record
to another person or cause another person to obtain control
of a controllable electronic record that is traceable to the
controllable electronic record; and
b. the controllable electronic record, a record attached
to or logically associated with the controllable electronic
record, or the system in which the controllable electronic
record is recorded, if any, enables the person to readily
identify itself as having the powers specified in paragraph
“a” . The person may be identified in any way, including by
name, identifying number, cryptographic key, office, or account
number.
2. Certain limitations on exclusivity permitted. A power
specified in subsection 1, paragraph “a” , is exclusive, even if:
a. the controllable electronic record or the system in which
the controllable electronic record is recorded, if any, limits
the use to which the controllable electronic record may be put
or has a protocol that is programmed to result in a transfer of
control; or
b. the person has agreed to share the power with another
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person.
Sec. 6. NEW SECTION . 554.14106 Discharge of account debtor
on controllable account or controllable payment intangible.
1. General rule —— discharge of account debtor on
controllable account or controllable payment intangible. Except
as provided in this section, an account debtor on a
controllable account or controllable payment intangible may
discharge its obligation:
a. by paying the person having control of the controllable
electronic record that evidences the controllable account or
controllable payment intangible; or
b. by paying a person that formerly had control of the
controllable electronic record.
2. Discharge of account debtor —— effect of notification of
transfer of control. Subject to subsections 3 and 7, an account
debtor may not discharge its obligation by paying a person that
formerly had control of the controllable electronic record if
the account debtor receives a notification, authenticated by a
person that formerly had control or the person to which control
was transferred, that reasonably identifies the controllable
account or controllable payment intangible, notifies the
account debtor that control of the controllable electronic
record that evidences the controllable account or controllable
payment intangible was transferred, identifies the transferee,
and provides a commercially reasonable method by which the
account debtor is to pay the transferee. The transferee may be
identified in any way, including by name, identifying number,
cryptographic key, office, or account number. After receipt
of the notification, the account debtor may discharge its
obligation only by paying in accordance with the notification
and may not discharge the obligation by paying a person that
formerly had control.
3. When notification ineffective. Subject to subsection 7,
notification is ineffective under subsection 2:
a. unless, before the notification is sent, the account
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debtor and the person that at that time had control of the
controllable electronic record that evidences the controllable
account or controllable payment intangible agree in an
authenticated record to a commercially reasonable method by
which a person can furnish reasonable proof that control has
been transferred;
b. to the extent that an agreement between the account
debtor and the seller of a payment intangible limits the
account debtor’s duty to pay a person other than the seller and
the limitation is effective under law other than this Article;
or
c. at the option of the account debtor, if the notification
notifies the account debtor to divide a payment and pay
portions by more than one method.
4. Proof of transfer. Subject to subsection 7, if requested
by the account debtor, the person giving the notification shall
seasonably furnish reasonable proof, using the agreed method,
that control of the controllable electronic record has been
transferred. Unless the person complies with the request, the
account debtor may discharge its obligation by paying a person
that formerly had control, even if the account debtor has
received a notification under subsection 2.
5. When proof sufficient. A person furnishes reasonable
proof that control has been transferred if the person
demonstrates, using the agreed method, that the transferee has
the power to avail itself of substantially all the benefit
from the controllable electronic record, prevent others from
availing themselves of substantially all the benefit from the
controllable electronic record, and transfer these powers to
another person.
6. Subsection 3, paragraph “c”, not waivable. Subject to
subsection 7, an account debtor may not waive or vary its
option under subsection 3, paragraph “c” .
7. Rule for individual under other law. This section is
subject to law other than this Article which establishes a
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different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family, or
household purposes.
Sec. 7. NEW SECTION . 554.14107 Governing law.
Unless otherwise agreed to by the parties, the laws of this
state shall govern any actions taken pursuant to this Article.
Sec. 8. NEW SECTION . 554.14108 Applicability.
This Article applies to any transaction involving a
controllable electronic record that arises on or after the
effective date of this section. This Article does not apply to
any transaction involving a controllable electronic record that
arises before the effective date of this section even if the
transaction would be subject to this Article if the transaction
had arisen on or after the effective date of this section.
This Article does not apply to a right of action with regard to
any transaction involving a controllable electronic record that
has accrued before the effective date of this section.
Sec. 9. NEW SECTION . 554.14109 Savings clause.
Any transaction involving a controllable electronic record
that arose before the effective date of this section and
the rights, obligations, and interests flowing from that
transaction are governed by any statute or other rule amended
or repealed by this Act as if such amendment or repeal had not
occurred and may be terminated, completed, consummated, or
enforced under that statute or other rule.
DIVISION II
CORRESPONDING CHANGES
PART A
GENERAL PROVISIONS
Sec. 10. Section 554.1201, subsection 2, Code 2022, is
amended by adding the following new paragraph:
NEW PARAGRAPH . 0q. “Electronic” means relating to
technology having electrical, digital, magnetic, wireless,
optical, electromagnetic, or similar capabilities.
Sec. 11. Section 554.1201, subsection 2, paragraph x, Code
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2022, is amended to read as follows:
x. “Money” means a medium of exchange currently authorized
or adopted by a domestic or foreign government. The term
includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or
more countries.
Sec. 12. Section 554.1204, unnumbered paragraph 1, Code
2022, is amended to read as follows:
Except as otherwise provided in Articles 3 , 4 , and 5 , and 14 ,
a person gives value for rights if the person acquires them:
PART B
SECURED TRANSACTIONS
Sec. 13. Section 554.9102, subsection 1, paragraphs b, ac,
and bi, Code 2022, are amended to read as follows:
b. “Account” , except as used in “account for” , means a
right to payment of a monetary obligation, whether or not
earned by performance, for property that has been or is to
be sold, leased, licensed, assigned, or otherwise disposed
of; for services rendered or to be rendered; for a policy of
insurance issued or to be issued; for a secondary obligation
incurred or to be incurred; for energy provided or to be
provided; for the use or hire of a vessel under a charter or
other contract; arising out of the use of a credit or charge
card or information contained on or for use with the card;
or as winnings in a lottery or other game of chance operated
or sponsored by a state, governmental unit of a state, or
person licensed or authorized to operate the game by a state or
governmental unit of a state. The term includes controllable
accounts and health care insurance receivables. The term
does not include rights to payment evidenced by chattel paper
or an instrument, commercial tort claims, deposit accounts,
investment property, letter-of-credit rights or letters of
credit, or rights to payment for money or funds advanced or
sold, other than rights arising out of the use of a credit or
charge card or information contained on or for use with the
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card.
ac. “Deposit account” means a demand, time, savings,
passbook, or similar account maintained with a bank. The term
includes an account that is money under section 554.1201,
subsection 2, paragraph “x” . The term does not include
investment property or accounts evidenced by an instrument.
bi. “Payment intangible” means a general intangible
under which the account debtor’s principal obligation is a
monetary obligation. The term includes controllable payment
intangibles.
Sec. 14. Section 554.9102, subsection 1, Code 2022, is
amended by adding the following new paragraphs:
NEW PARAGRAPH . 0ab. “Controllable account” means an account
evidenced by a controllable electronic record that provides
that the account debtor undertakes to pay the person that has
control of the controllable electronic record under section
554.14105.
NEW PARAGRAPH . 00ab. “Controllable payment intangible” means
a payment intangible evidenced by a controllable electronic
record that provides that the account debtor undertakes to pay
the person that has control of the controllable electronic
record under section 554.14105.
NEW PARAGRAPH . 0av. “Intangible money” means money that
is represented or evidenced by an electronic record. The term
does not include money that is a deposit account.
NEW PARAGRAPH . 0cb. “Tangible money” means money that is
represented or evidenced by a record consisting of information
that is inscribed on a tangible medium.
Sec. 15. Section 554.9102, subsection 2, Code 2022, is
amended by adding the following new paragraph:
NEW PARAGRAPH . 0i. “Controllable electronic
record” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 554.14102.
Sec. 16. NEW SECTION . 554.9105A Control of intangible
money.
1. Requirements for control. A person has control of
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intangible money if the following conditions are met:
a. the intangible money or the system in which the
intangible money is recorded, if any, gives the person:
(1) the power to avail itself of substantially all the
benefit from the intangible money; and
(2) subject to subsection 2, the exclusive power to:
(a) prevent others from availing themselves of
substantially all the benefit from the intangible money; and
(b) transfer control of the intangible money to another
person or cause another person to obtain control of intangible
money that is traceable to the intangible money; and
b. the intangible money, a record attached to or logically
associated with the intangible money, or the system in which
the intangible money is recorded, if any, enables the person to
readily identify itself as having the powers under paragraph
“a” . The person may be identified in any way, including by
name, identifying number, cryptographic key, office, or account
number.
2. Certain limitations on exclusivity permitted. A power
specified in subsection 1 is exclusive, even if:
a. the intangible money or the system in which the
intangible money is recorded, if any, limits the use to which
the intangible money may be put or has protocols that are
programmed to result in a transfer of control; or
b. the person has agreed to share the power with another
person.
Sec. 17. NEW SECTION . 554.9107A Control of controllable
electronic record, controllable account, or controllable payment
intangible.
1. Control under section 554.14105. A secured party has
control of a controllable electronic record as provided in
section 554.14105.
2. Controllable account or controllable payment
intangible. A secured party has control of a controllable
account or controllable payment intangible if the secured
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party has control of the controllable electronic record that
evidences the controllable account or controllable payment
intangible.
Sec. 18. Section 554.9203, subsection 2, Code 2022, is
amended to read as follows:
2. Enforceability. Except as otherwise provided in
subsections 3 through 9 10 , a security interest is enforceable
against the debtor and third parties with respect to the
collateral only if:
a. value has been given;
b. the debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party; and
c. one of the following conditions is met:
(1) the debtor has authenticated a security agreement that
provides a description of the collateral and, if the security
interest covers timber to be cut, a description of the land
concerned;
(2) the collateral is not a certificated security and is
in the possession of the secured party under section 554.9313
pursuant to the debtor’s security agreement;
(3) the collateral is a certificated security in registered
form and the security certificate has been delivered to the
secured party under section 554.8301 pursuant to the debtor’s
security agreement; or
(4) the collateral is controllable electronic records,
controllable accounts, controllable payment intangibles,
deposit accounts, electronic chattel paper, intangible money,
investment property, letter-of-credit rights, or electronic
documents, and the secured party has control under section
554.7106 , 554.9104 , 554.9105 , 554.9105A, 554.9106 , or 554.9107 ,
or 554.9107A pursuant to the debtor’s security agreement.
Sec. 19. Section 554.9203, Code 2022, is amended by adding
the following new subsection:
NEW SUBSECTION . 10. Controllable account or payment
intangible. The attachment of a security interest in a
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controllable electronic record that evidences a controllable
account or controllable payment intangible is also attachment
of a security interest in the controllable account or
controllable payment intangible.
Sec. 20. Section 554.9207, subsection 3, Code 2022, is
amended to read as follows:
3. Duties and rights when secured party in possession or
control. Except as otherwise provided in subsection 4 , a
secured party having possession of collateral or control
of collateral under section 554.7106 , 554.9104 , 554.9105 ,
554.9106 , or 554.9107 , or 554.9107A :
a. may hold as additional security any proceeds, except
money or funds, received from the collateral;
b. shall apply money or funds received from the collateral
to reduce the secured obligation, unless remitted to the
debtor; and
c. may create a security interest in the collateral.
Sec. 21. Section 554.9301, subsection 3, Code 2022, is
amended to read as follows:
3. Except as otherwise provided in subsection 4 , while
tangible negotiable documents, goods, instruments, tangible
money, or tangible chattel paper is located in a jurisdiction,
the local law of that jurisdiction governs:
a. perfection of a security interest in the goods by filing
a fixture filing;
b. perfection of a security interest in timber to be cut;
and
c. the effect of perfection or nonperfection and the
priority of a nonpossessory security interest in the
collateral.
Sec. 22. Section 554.9308, Code 2022, is amended by adding
the following new subsection:
NEW SUBSECTION . 8. Controllable account or payment
intangible. Perfection of a security interest in a controllable
electronic record that evidences a controllable account or
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controllable payment intangible also perfects a security
interest in the controllable account or controllable payment
intangible.
Sec. 23. Section 554.9310, subsection 2, paragraph h, Code
2022, is amended to read as follows:
h. in deposit accounts, electronic chattel paper, electronic
documents, intangible money, investment property, controllable
electronic records, controllable accounts, controllable payment
intangible, or letter-of-credit rights which is perfected by
control under section 554.9314 ;
Sec. 24. Section 554.9312, Code 2022, is amended to read as
follows:
554.9312 Perfection of security interests in controllable
electronic records, controllable accounts, controllable payment
intangibles, chattel paper, deposit accounts, documents,
goods covered by documents, instruments, investment property,
letter-of-credit rights, and money —— perfection by permissive
filing —— temporary perfection without filing or transfer of
possession.
1. Perfection by filing permitted. A security interest
in controllable electronic records, controllable accounts,
controllable payment intangibles, chattel paper, negotiable
documents, instruments, or investment property may be perfected
by filing.
2. Control or possession of certain collateral. Except as
otherwise provided in section 554.9315, subsections 3 and 4 ,
for proceeds:
a. a security interest in a deposit account may be perfected
only by control under section 554.9314 ;
b. and except as otherwise provided in section 554.9308,
subsection 4 , a security interest in a letter-of-credit right
may be perfected only by control under section 554.9314 ; and
c. a security interest in tangible money may be perfected
only by the secured party’s taking possession under section
554.9313 ; and
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d. a security interest in intangible money may be perfected
only by control under section 554.9105A .
3. Goods covered by negotiable document. While goods are
in the possession of a bailee that has issued a negotiable
document covering the goods:
a. a security interest in the goods may be perfected by
perfecting a security interest in the document; and
b. a security interest perfected in the document has
priority over any security interest that becomes perfected in
the goods by another method during that time.
4. Goods covered by nonnegotiable document. While goods are
in the possession of a bailee that has issued a nonnegotiable
document covering the goods, a security interest in the goods
may be perfected by:
a. issuance of a document in the name of the secured party;
b. the bailee’s receipt of notification of the secured
party’s interest; or
c. filing as to the goods.
5. Temporary perfection —— new value. A security
interest in certificated securities, negotiable documents,
or instruments is perfected without filing or the taking of
possession or control for a period of twenty days from the time
it attaches to the extent that it arises for new value given
under an authenticated security agreement.
6. Temporary perfection —— goods or documents made available
to debtor. A perfected security interest in a negotiable
document or goods in possession of a bailee, other than one
that has issued a negotiable document for the goods, remains
perfected for twenty days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of:
a. ultimate sale or exchange; or
b. loading, unloading, storing, shipping, transshipping,
manufacturing, processing, or otherwise dealing with them in a
manner preliminary to their sale or exchange.
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7. Temporary perfection —— delivery of security certificate
or instrument to debtor. A perfected security interest in
a certificated security or instrument remains perfected for
twenty days without filing if the secured party delivers the
security certificate or instrument to the debtor for the
purpose of:
a. ultimate sale or exchange; or
b. presentation, collection, enforcement, renewal, or
registration of transfer.
8. Expiration of temporary perfection. After the twenty-day
period specified in subsection 5, 6, or 7 expires, perfection
depends upon compliance with this Article .
Sec. 25. Section 554.9313, subsection 1, Code 2022, is
amended to read as follows:
1. Perfection by possession or delivery. Except as otherwise
provided in subsection 2 , a secured party may perfect a
security interest in tangible negotiable documents, goods,
instruments, tangible money, or tangible chattel paper by
taking possession of the collateral. A secured party may
perfect a security interest in certificated securities by
taking delivery of the certificated securities under section
554.8301 .
Sec. 26. Section 554.9314, subsections 1 and 2, Code 2022,
are amended to read as follows:
1. Perfection by control. A security interest in investment
property, deposit accounts, intangible money, letter-of-credit
rights, controllable electronic records, controllable accounts,
controllable payment intangibles, electronic chattel paper,
or electronic documents may be perfected by control of the
collateral under section 554.7106 , 554.9104 , 554.9105 ,
554.9105A, 554.9106 , or 554.9107 , or 554.9107A .
2. Specified collateral —— time of perfection by control ——
continuation of perfection. A security interest in controllable
electronic records, controllable accounts, controllable payment
intangibles, deposit accounts, intangible money, electronic
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chattel paper, letter-of-credit rights, or electronic documents
is perfected by control under section 554.7106 , 554.9104 ,
554.9105 , or 554.9107 , or 554.9107A when the secured party
obtains control and remains perfected by control only while the
secured party retains control.
Sec. 27. NEW SECTION . 554.9326A Priority of security
interests in controllable electronic records, controllable
accounts, and controllable payment intangibles.
A security interest in a controllable electronic record,
controllable account, or controllable payment intangible
held by a secured party having control of the controllable
electronic record, controllable account, or controllable
payment intangible has priority over a conflicting security
interest held by a secured party that does not have control.
Sec. 28. Section 554.9331, Code 2022, is amended to read as
follows:
554.9331 Priority of rights of purchasers of instruments,
documents, and securities , controllable electronic records,
controllable accounts, and controllable payment intangibles under
other articles Articles —— priority of interests in financial
assets and security entitlements under Article 8 and controllable
electronic records under Article 14 .
1. Rights under Articles 3 , 7 , and 8 , and 14 not
limited. This Article does not limit the rights of a holder
in due course of a negotiable instrument, a holder to which a
negotiable document of title has been duly negotiated, or a
protected purchaser of a security , or a qualifying purchaser of
a controllable electronic record . These holders or purchasers
take priority over an earlier security interest, even if
perfected, to the extent provided in Articles 3 , 7 , and 8 , and
14 .
2. Protection under Article Articles 8 and 14 . This Article
does not limit the rights of or impose liability on a person to
the extent that the person is protected against the assertion
of a claim under Article 8 or 14 .
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3. Filing not notice. Filing under this Article does not
constitute notice of a claim or defense to the holders, or
purchasers, or persons described in subsections 1 and 2 .
Sec. 29. Section 554.9406, subsections 1, 2, and 3, Code
2022, are amended to read as follows:
1. Discharge of account debtor —— effect of
notification. Subject to subsections 2 through 9 and
11 , an account debtor on an account, chattel paper, or a
payment intangible may discharge its obligation by paying the
assignor until, but not after, the account debtor receives a
notification, authenticated by the assignor or the assignee,
that the amount due or to become due has been assigned and that
payment is to be made to the assignee. After receipt of the
notification, the account debtor may discharge its obligation
by paying the assignee and may not discharge the obligation by
paying the assignor.
2. When notification ineffective. Subject to subsection
subsections 8 and 11 , notification is ineffective under
subsection 1 :
a. if it does not reasonably identify the rights assigned;
b. to the extent that an agreement between an account
debtor and a seller of a payment intangible limits the account
debtor’s duty to pay a person other than the seller and the
limitation is effective under law other than this Article ; or
c. at the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount
of any installment or other periodic payment to the assignee,
even if:
(1) only a portion of the account, chattel paper, or payment
intangible has been assigned to that assignee;
(2) a portion has been assigned to another assignee; or
(3) the account debtor knows that the assignment to that
assignee is limited.
3. Proof of assignment. Subject to subsection subsections
8 and 11 , if requested by the account debtor, an assignee shall
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seasonably furnish reasonable proof that the assignment has
been made. Unless the assignee complies, the account debtor
may discharge its obligation by paying the assignor, even if
the account debtor has received a notification under subsection
1 .
Sec. 30. Section 554.9406, Code 2022, is amended by adding
the following new subsection:
NEW SUBSECTION . 11. Inapplicability of certain
subsections. Subsections 1 through 3 and 7 do not apply to a
controllable account or controllable payment intangible.
Sec. 31. Section 554.9601, subsection 2, Code 2022, is
amended to read as follows:
2. Rights and duties of secured party in possession or
control. A secured party in possession of collateral or control
of collateral under section 554.7106 , 554.9104 , 554.9105 ,
554.9106 , or 554.9107 , or 554.9107A has the rights and duties
provided in section 554.9207 .
Sec. 32. Section 554.9605, Code 2022, is amended to read as
follows:
554.9605 Unknown debtor or secondary obligor.
1. Duties to unknown persons —— general rule. A Subject to
subsection 2, a secured party does not owe a duty based on its
status as secured party:
1. a. to a person that is a debtor or obligor, unless the
secured party knows:
a. (1) that the person is a debtor or obligor;
b. (2) the identity of the person; and
c. (3) how to communicate with the person; or
2. b. to a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
a. (1) that the person is a debtor; and
b. (2) the identity of the person.
2. When subsection 1 not applicable —— notice that nature
of collateral or system in which collateral recorded prevents
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acquisition of knowledge. Subsection 1 does not apply to a
secured party that, at the time the secured party’s security
interest attaches to a controllable electronic record,
controllable account, or controllable payment intangible, has
notice that the nature of the collateral or the system in
which the collateral is recorded, if any, would prevent the
secured party from acquiring the knowledge specified in that
subsection.
Sec. 33. Section 554.9628, subsection 2, Code 2022, is
amended to read as follows:
2. Limitation of liability based on status as secured
party. A Subject to subsection 2A, a secured party is not
liable because of its status as secured party:
a. to a person that is a debtor or obligor, unless the
secured party knows:
(1) that the person is a debtor or obligor;
(2) the identity of the person; and
(3) how to communicate with the person; or
b. to a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
(1) that the person is a debtor; and
(2) the identity of the person.
Sec. 34. Section 554.9628, Code 2022, is amended by adding
the following new subsection:
NEW SUBSECTION . 2A. When subsection 2 not applicable ——
notice that nature of collateral or system in which collateral
recorded prevents acquisition of knowledge. Subsection 2 does
not apply to a secured party that, at the time the secured
party’s security interest attaches to a controllable electronic
record, controllable account, or controllable payment
intangible, has notice that the nature of the collateral
or the system in which the collateral is recorded, if any,
would prevent the secured party from acquiring the knowledge
specified in that subsection.
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EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
BACKGROUND. This bill creates a new article within Code
chapter 554, Iowa’s version of the uniform commercial code
(UCC) covering commercial transactions involving personal
property. New Article 12 cited as “Uniform Commercial
Code —— Controllable Electronic Records” was drafted by a
committee appointed jointly by the uniform law commission
and the American law institute. The bill incorporates the
provisions of that draft under new Article 14 (new Code section
554.14101). New Article 14 governs commercial transactions
involving digital assets, including those involving virtual
currencies, and the use of distributed ledger technology (DLT).
Traditionally, a currency is a government-authorized medium of
exchange and specifically money (Code section 554.1201(2)(x)).
By comparison, a virtual currency is only available as an
electronic record and is decentralized. An electronic record
is used to create or transfer rights to receive payment, to
receive performance of services or delivery of goods, and to
transfer an interest in property. It may also be used as a
medium of exchange and assigned intrinsic value.
CONTROLLABLE ELECTRONIC RECORDS. The bill applies to a form
of digital assets used in electronic commerce and referred
to as controllable electronic records. The UCC defines a
record as information retrievable in an electronic form (Code
section 554.1201(2)(ae)). A controllable electronic record is
a record that is stored in an electronic or other intangible
medium and that must be subject to control (new Code section
554.14105). Control is determined by the type of property
involved and new Article 14 specifies the rights of a purchaser
of a controllable electronic record who acquires whatever
rights the transferor had or had the power to transfer;
the rule recognized generally under the UCC as shelter (new
Code section 554.14104). Specifically, control involves
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the power to (1) derive substantially all the benefit from
the controllable electronic record, (2) prevent others from
deriving substantially all the benefit from the controllable
electronic record, and (3) transfer control of the controllable
electronic record to another person or cause another person to
obtain control of a controllable electronic record.
QUALIFIED PURCHASERS. A purchaser who is transferred
control of a controllable electronic record for value, in good
faith, and without notice of any claim of a property interest
in the controllable electronic record is referred to as a
qualified purchaser who takes the controllable electronic
record free of any claims against the property. Generally, law
outside Article 14 determines what rights a person must take
in order to acquire an interest in a controllable electronic
record which would include the creditor-debtor provisions in
Article 9. A security interest in a controllable electronic
record, controllable account, or controllable payment
intangible perfected by control has priority over a conflicting
security interest perfected by another method (e.g., the
filing of an Article 9 financing statement) (new Code section
554.9326A).
SPECIAL TYPES OF PROPERTY. Special provisions apply to
accounts and payment intangibles in the form of controllable
electronic records. The right to payment under these
intangibles is referred to as controllable accounts and
controllable payment intangibles (amended Code section
554.9102(2)). Under Article 9, the attachment and perfection
of a security interest in a controllable electronic record
would also be attachment of a security interest in controllable
accounts and controllable payment intangibles evidenced by
the controllable electronic record (amended Code section
554.9203(10)). Under Article 14, a qualifying purchaser
of a controllable electronic record acquires rights in the
controllable account or controllable payment intangible
free of any claim (new Code section 554.14104). The bill
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also recognizes intangible money evidenced by a controllable
electronic record (amended Code section 554.9102(1)).
Similarly, a person having control over the controllable
electronic record takes free of any claim (new Code section
554.9105A).
BACKGROUND —— ARTICLES 1 AND 9. Article 1 includes general
provisions, including definitions, that apply throughout the
Code chapter. This includes providing a definition of the
term “electronic” and amending the definition of “account”
to include “controllable accounts” (Code section 554.1201).
Closely connected to new Article 14 is current Article 9, cited
as the “Uniform Commercial Code —— Secured Transactions” (Code
section 554.9101). Article 9 governs how a debtor provides
the debtor’s property as collateral to secure financing
provided by a creditor. The creditor obtains a lien in the
collateral to secure the debt. Article 9 provides for the
rights and obligations of the debtor and creditor as well
as other persons, including other creditors, engaged in
commercial transactions which involve that debtor’s collateral.
Generally, the creditor becomes a secured party able to enforce
rights against the debtor when a security interest attaches to
the debtor’s collateral. The secured party is able to enforce
creditor rights against other persons when the creditor’s
security agreement is perfected. Article 9 provides different
procedures to attach a security interest to collateral, and
to perfect that security interest, depending upon how Article
9 classifies that collateral. Generally, Article 9 covers
two broad categories of collateral described as tangible or
intangible property. Tangible property includes firm assets
such as cars, equipment, inventory, and goods. In the case of
a security interest in money, perfection requires possession.
Intangible property includes accounts receivable, promissory
notes, securities, letters of credit, and interests in business
entities. The two principal forms of perfection are (1) the
secured party’s possession of the collateral and (2) the filing
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of a financing statement with the secretary of state, in which
case the secured party receives priority over secured parties
who do not file a financing statement or who file a financing
statement later in time.
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