Bill Text: IL SB3813 | 2011-2012 | 97th General Assembly | Engrossed

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Bill Title: 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.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Failed) 2013-01-08 - Session Sine Die [SB3813 Detail]

Download: Illinois-2011-SB3813-Engrossed.html

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AN ACT concerning business.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Uniform Commercial Code is amended by
changing Sections 9-510 and 9-516 and by adding Section 9-501.1
as follows:
(810 ILCS 5/9-501.1 new)
Sec. 9-501.1. Fraudulent records.
(a) No person shall cause to be communicated to the filing
office for filing a false record the person knows or reasonably
should know:
(1) is not authorized or permitted under Section 9-509,
9-708, or 9-808 of this Article;
(2) is not related to a valid existing or potential
commercial or financial transaction, an existing
agricultural or other lien, or a judgment of a court of
competent jurisdiction; and
(3) is filed with the intent to harass or defraud the
person identified as debtor in the record or any other
person.
(b) A person who violates subsection (a) is guilty of a
Class A misdemeanor for a first offense and a Class 4 felony
for a second or subsequent offense.

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(c) A person who violates subsection (a) shall be liable in
a civil action to each injured person for:
(1) the greater of the actual damages caused by the
violation or up to $10,000 in lieu of actual damages;
(2) reasonable attorney's fees;
(3) court costs and other related expenses of bringing
an action, including reasonable investigative expenses;
and
(4) in the discretion of the court, exemplary damages
in an amount determined by the court or jury.
(d) A person identified as debtor in a filed record the
person believes was caused to be communicated to the filing
office in violation of subsection (a) may, under penalty of
perjury, file with the Secretary of State an affidavit to that
effect. The Secretary of State shall adopt and make available a
form affidavit for use under this Section.
(e) Upon receipt of an affidavit filed under this Section,
or upon administrative action by the Secretary of State, the
Secretary of State shall communicate to the secured party of
record on the record to which the affidavit or administrative
action relates and to the person that communicated the record
to the filing office, if different and known to the office, a
request for additional documentation supporting the
effectiveness of the record. The Department of Business
Services of the Office of the Secretary of State and the Office
of the General Counsel shall review all such documentation

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received within 30 days after the first request for additional
documentation is sent. The Secretary of State may terminate the
record effective 30 days after the first request for additional
documentation is sent if it has a reasonable basis for
concluding that the record was communicated to the filing
office in violation of subsection (a).
The Secretary of State may initiate an administrative
action under the first paragraph of this subsection (e) with
regard to a filed record if it has reason to believe, from
information contained in the record or obtained from the person
that communicated the record to the filing office, that the
record was communicated to the filing office in violation of
subsection (a). The Secretary of State may give heightened
scrutiny to a record that indicates that the debtor is a
transmitting utility or that indicates that the transaction to
which the record relates is a manufactured-home transaction or
a public-finance transaction.
(f) The Secretary of State shall not charge a fee to file
an affidavit under this Section and shall not return any fee
paid for filing a record terminated under this Section.
(g) The Secretary of State shall promptly communicate to
the secured party of record a notice of the termination of a
record under subsection (e). A secured party of record that
believes in good faith that the record was not communicated to
the filing office in violation of subsection (a) may file an
action to require that the record be reinstated by the filing

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office. A person that communicated a record to the filing
office that the filing office rejected in reliance on Section
9-516(b)(3.5), who believes in good faith that the record was
not communicated to the filing office in violation of Section
9-516(b)(3.5), may file an action to require that the record be
accepted by the filing office.
(h) If a court or tribunal in an action under this Section
determines that a record terminated under this Section or
rejected in reliance on Section 9-516(b)(3.5) should be
reinstated or accepted, the court or tribunal shall provide a
copy of its order to that effect to the Secretary of State. On
receipt of an order reinstating a terminated record, the
Secretary of State shall refile the record along with a notice
indicating that the record was refiled pursuant to this Section
and its initial filing date. On receipt of an order requiring
that a rejected record be accepted, the Secretary of State
shall promptly file the record along with a notice indicating
that the record was filed pursuant to this Section and the date
on which it was communicated for filing. A rejected record that
is filed pursuant to an order of a court or tribunal shall have
the effect described in Section 9-516(d) for a record the
filing office refuses to accept for a reason other than one set
forth in Section 9-516(b).
(i) A terminated record that is refiled under subsection
(h) is effective as a filed record from the initial filing
date. If the period of effectiveness of a refiled record would

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have lapsed during the period of termination, the secured party
may file a continuation statement within 30 days after the
record is refiled and the continuation statement shall have the
same effect as if it had been filed during the 6-month period
described in Section 9-515(d). A refiled record shall be
considered never to have been ineffective against all persons
and for all purposes except that it shall not be effective as
against a purchaser of the collateral that gave value in
reasonable reliance on the absence of the record from the
files.
(j) Neither the filing office nor any of its employees
shall incur liability for the termination or failure to
terminate a record under this Section or for the refusal to
accept a record for filing in the lawful performance of the
duties of the office or employee.
(k) This Section does not apply to a record communicated to
the filing office by a regulated financial institution or by a
representative of a regulated financial institution except
that the Secretary of State may request from the secured party
of record on the record or from the person that communicated
the record to the filing office, if different and known to the
office, additional documentation supporting that the record
was communicated to the filing office by a regulated financial
institution or by a representative of a regulated financial
institution. The term "regulated financial institution" means
a financial institution subject to regulatory oversight or

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examination by a State or federal agency and includes banks,
savings banks, savings associations, building and loan
associations, credit unions, consumer finance companies,
industrial banks, industrial loan companies, insurance
companies, investment companies, investment funds, installment
sellers, mortgage servicers, sales finance companies, and
leasing companies.
(l) If a record was communicated to the filing office for
filing before the effective date of this Section and its
communication would have constituted a violation of subsection
(a) if it had occurred on or after the effective date of the
Section: (i) subsections (b) and (c) are not applicable; and
(ii) the other subsections of this Section are applicable.
(810 ILCS 5/9-510)
Sec. 9-510. Effectiveness of filed record.
(a) Filed record effective if authorized. A filed record is
effective only to the extent that it was filed by a person that
may file it under Section 9-509.
(b) Authorization by one secured party of record. A record
authorized by one secured party of record does not affect the
financing statement with respect to another secured party of
record.
(c) Continuation statement not timely filed. A
continuation statement that is not filed within the six-month
period prescribed by Section 9-515(d) is ineffective.

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(d) A filed record ceases to be effective if the filing
office terminates the record pursuant to Section 9-501.1.
(Source: P.A. 91-893, eff. 7-1-01.)
(810 ILCS 5/9-516)
Sec. 9-516. What constitutes filing; effectiveness of
filing.
(a) What constitutes filing. Except as otherwise provided
in subsection (b), communication of a record to a filing office
and tender of the filing fee or acceptance of the record by the
filing office constitutes filing.
(b) Refusal to accept record; filing does not occur. Filing
does not occur with respect to a record that a filing office
refuses to accept because:
(1) the record is not communicated by a method or
medium of communication authorized by the filing office;
(2) an amount equal to or greater than the applicable
filing fee is not tendered;
(3) the filing office is unable to index the record
because:
(A) in the case of an initial financing statement,
the record does not provide a name for the debtor;
(B) in the case of an amendment or correction
statement, the record:
(i) does not identify the initial financing
statement as required by Section 9-512 or 9-518, as

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applicable; or
(ii) identifies an initial financing statement
whose effectiveness has lapsed under Section
9-515; or
(iii) identifies an initial financing
statement which was terminated pursuant to Section
9-501.1;
(C) in the case of an initial financing statement
that provides the name of a debtor identified as an
individual or an amendment that provides a name of a
debtor identified as an individual which was not
previously provided in the financing statement to
which the record relates, the record does not identify
the debtor's last name;
(D) in the case of a record filed or recorded in
the filing office described in Section 9-501(a)(1),
the record does not provide a sufficient description of
the real property to which it relates; or
(E) in the case of a record submitted to the filing
office described in Section 9-501(a)(1), the filing
office has reason to believe, from information
contained in the record or from the person that
communicated the record to the office, that: (i) if the
record indicates that the debtor is a transmitting
utility, the debtor does not meet the definition of a
transmitting utility as described in Section

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9-102(a)(81); (ii) if the record indicates that the
transaction relating to the record is a
manufactured-home transaction, the transaction does
not meet the definition of a manufactured-home
transaction as described in Section 9-102(a)(54); or
(iii) if the record indicates that the transaction
relating to the record is a public-finance
transaction, the transaction does not meet the
definition of a public-finance transaction as
described in Section 9-102(a)(67); 9-501(b), the
debtor does not meet the definition of a transmitting
utility as described in Section 9-102(a)(80);
(3.5) in the case of an initial financing statement or
an amendment, if the filing office believes in good faith
that the record was communicated to the filing office in
violation of Section 9-501.1(a); a document submitted for
filing is being filed for the purpose of defrauding any
person or harassing any person in the performance of duties
as a public servant;
(4) in the case of an initial financing statement or an
amendment that adds a secured party of record, the record
does not provide a name and mailing address for the secured
party of record;
(5) in the case of an initial financing statement or an
amendment that provides a name of a debtor which was not
previously provided in the financing statement to which the

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amendment relates, the record does not:
(A) provide a mailing address for the debtor;
(B) indicate whether the debtor is an individual or
an organization; or
(C) if the financing statement indicates that the
debtor is an organization, provide:
(i) a type of organization for the debtor;
(ii) a jurisdiction of organization for the
debtor; or
(iii) an organizational identification number
for the debtor or indicate that the debtor has
none;
(6) in the case of an assignment reflected in an
initial financing statement under Section 9-514(a) or an
amendment filed under Section 9-514(b), the record does not
provide a name and mailing address for the assignee; or
(7) in the case of a continuation statement, the record
is not filed within the six-month period prescribed by
Section 9-515(d).
(c) Rules applicable to subsection (b). For purposes of
subsection (b):
(1) a record does not provide information if the filing
office is unable to read or decipher the information; and
(2) a record that does not indicate that it is an
amendment or identify an initial financing statement to
which it relates, as required by Section 9-512, 9-514, or

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9-518, is an initial financing statement.
(d) Refusal to accept record; record effective as filed
record. A record that is communicated to the filing office with
tender of the filing fee, but which the filing office refuses
to accept for a reason other than one set forth in subsection
(b), is effective as a filed record except as against a
purchaser of the collateral which gives value in reasonable
reliance upon the absence of the record from the files.
(e) The Secretary of State may refuse to accept a record
for filing under subdivision (b)(3)(E) or (b)(3.5) only if the
refusal is approved by the Department of Business Services of
the Secretary of State and the General Counsel to the Secretary
of State.
(Source: P.A. 95-446, eff. 1-1-08.)
Section 99. Effective date. This Act takes effect upon
becoming law.