HOUSE BILL REPORT

                 ESB 5163

             As Reported By House Committee On:

                        Law & Justice

Title:  An act relating to the expiration of filed financing statements.

Brief Description:  Filing financing statements.

Sponsors:  Senators Haugen and Schow.

Brief History:

Committee Activity:

Law & Justice:  3/21/97 [DP].

HOUSE COMMITTEE ON LAW & JUSTICE

Majority Report:  Do pass.  Signed by 13 members:  Representatives Sheahan, Chairman; McDonald, Vice Chairman; Sterk, Vice Chairman; Costa, Ranking Minority Member; Constantine, Assistant Ranking Minority Member; Carrell; Cody; Kenney; Lambert; Lantz; Radcliff; Sherstad and Skinner.

Staff:  Trudes Hutcheson (786-7384).

Background:  Article 9 of the Uniform Commercial Code governs secured transactions.  A security interest provides the creditor with a lien in the collateral and gives the creditor the legal ability, upon the debtor=s default, to force sale of the asset.  A security interest can also provide a creditor with a priority in the collateral above others asserting claims in the same collateral.

To obtain priority, the creditor must perfect his or her security interest.  Perfecting a security interest requires the creditor to do certain things, depending upon the collateral.  For most collateral, a security interest may be perfected by filing a financing statement with the Department of Licensing.

The filed financing statement is effective for five years.  For the security interest to remain perfected, the creditor must file a continuation statement before the five years expire.  If the creditor fails to file a continuation statement before the expiration date, the creditor=s security interest is no longer perfected and the creditor may lose priority in the collateral.

Summary of Bill:  Immediately following a date that is four and one-half years after the filing of a financing statement, the Department of Licensing must provide notice of the five-year expiration period and of the availability of a continuation statement.  Failure to provide notification does not result in liability against the state.

Appropriation:  None.

Fiscal Note:  Requested on March 18, 1997.

Effective Date:  Ninety days after adjournment of session in which bill is passed.

Testimony For:  Notifying creditors that their financing statements will expire within a certain amount of time will protect small business people and average citizens.

Testimony Against:  None.

Testified:  Senator Haugen, prime sponsor.