Committee hears testimony on bill to block and remove unauthorized UCC filings

The Civil Rights and Judiciary Committee on Jan. 30 heard testimony on House Bill 2640, which would create administrative procedures to address unauthorized Uniform Commercial Code (UCC) Article 9A financing-statement filings and impose criminal penalties for intentional misuse.

ED Adams, staff of the committee, said the bill ‘‘addresses unauthorized uniform commercial code filings under article 9 a’’ and laid out that the proposal lets the Department of Licensing refuse an initial or amended financing statement if it reasonably believes the filing was communicated with intent to harass or defraud the named debtor. Adams told the panel the bill ‘‘creates procedures for addressing unauthorized filings of financing statements’’ including a termination process and preservation of court oversight.

James Manuel, tribal and federal liaison with the Department of Licensing, testified in support, describing the bill as ‘‘narrowly focused on intentional misuse of the UCC filing system’’ and saying the changes would provide a lower-cost option for people harmed by abusive filings. Manuel told the committee that harassing or fraudulent filings can affect credit decisions, housing opportunities and business banking, and said the department has heard concerns from consular communities whose foreign dignitaries have been targeted.

Committee members pressed agency witnesses on safeguards and process. Representative Jacobson said he was ‘‘struggling as to why we need this’’ and asked for specific examples of harm; Manuel responded that the filing office currently performs a ministerial clerical role that accepts complete forms and fees without validating underlying security agreements, and that as a result some records become public and can appear on credit reports even if there is no valid security interest. Representative Walsh asked whether the Department of Licensing has the capacity to make consistent determinations and whether there are existing deterrents for vexatious filers; Manuel said the bill contemplates building a limited review capacity within the department and that court review remains available for parties who disagree with administrative actions.

Key provisions described to the committee: - The Department of Licensing may refuse to accept filings believed to have been made to harass or defraud the debtor. - A debtor may submit an affidavit sworn under penalty of perjury asserting the filing was unauthorized and intended to harass or defraud; upon receipt the department must file a termination statement and notify the secured party; the termination becomes effective 30 days after filing. - A secured party may request an administrative review and may seek reinstatement from a court if the court finds the original filing was authorized. If the court finds the filing was made with intent to harass or defraud, the department and the debtor may recover costs and reasonable attorneys’ fees. - The bill creates criminal penalties for intentional unauthorized filings: a first violation is described as a gross misdemeanor and a second or subsequent violation as a class C felony.

The hearing closed with no immediate committee action on HB 2640; the committee moved into executive session for other bills. The record includes testimony from ED Adams (committee staff) and James Manuel (Department of Licensing).