DEAR BOARD OF DIRECTORS:
This letter is intended to alert credit unions to major revisions to Article 9 of the Uniform Commercial Code (UCC) that were drafted and endorsed by the National Conference of Commissioners on Uniform State Laws and the American Law Institute. The changes affect new types of collateral and transactions and other changes that involve loan documentation, required filings and notifications. Financial institutions including credit unions and their lawyers will need to understand and comply with the requirements of the revised, as well as the existing, Article 9 of the UCC as it is passed into law by each state. Article 9 governs transactions involving the granting of credit secured by personal property.
Working together through the Federal Financial Institutions Examination Council (FFIEC), the NCUA participated in the drafting of the enclosed FFIEC statement. Members of the FFIEC include the Board of Governors of the Federal Reserve System, Office of Thrift Supervision, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and National Credit Union Administration.
The FFIEC statement said that financial institutions need to protect security interests on new transactions and ensure that existing rights are not lost. In addition, financial institutions are expected to determine the need for and implement revised policies, procedures, systems and documentation; review secured transactions entered into under existing Article 9 to ensure that rights are protected under the revised Article 9; and provide training to staff to implement the changes. Since filings recorded before the effective date of July 1, 2001 can in some cases remain valid until June 30, 2006, the FFIEC statement warns that financial institutions will need to conduct UCC searches both under the current and the revised rules until all of the pre-revision filings have expired.
A copy of the FFIEC statement is attached.
National Credit Union Administration