Key takeaways:
- New Administrative Procedure: Senate Bill 2221, effective September 1, 2025, amends Texas UCC law to introduce a new administrative procedure for terminating fraudulent or baseless UCC-1 financing statements.
- Affidavit Filing: A person identified as a debtor can file an affidavit under penalty of perjury, along with proof of notice to each secured party of record, to have the fraudulent financing statement terminated.
- Termination Statement: Upon accepting the affidavit, the filing office will file a termination statement, which becomes effective 30 days after filing. Secured parties can challenge the termination in court within 90 days.
Senate Bill 2221, effective September 1, 2025, amends Texas UCC law to create an administrative procedure that a person named as a debtor in what the person believes to be a fraudulent or baseless UCC-1 financing statement can use to have the UCC filing office terminate that financing statement. Below is a summary of the new procedure. For full details, please see Senate Bill 2221.
Debtor files an affidavit and proof of notice with UCC filing office
A person identified as a debtor in a financing statement that the person believes was not permitted to be filed can file an affidavit with the office in which the financing statement was filed. The affidavit must be signed under penalty of perjury and state that the financing statement was not permitted to be filed.
Before filing the affidavit, the person has to send a written notice to each secured party of record identified in the financing statement, along with a copy of the financing statement. The notice must be sent (by certified mail, return receipt requested) between 5 days and 30 days before filing the affidavit. There is required language for the notice, which basically informs the secured party of the person’s intention to the file the affidavit, that the financing statement will be terminated by the filing office 30 days later, that if the secured party is a regulated lending institution, it should notify the filing office of that fact, and that the secured party can bring an action against the person if the secured party believes the financing statement was permitted to be filed. (For the exact language required in the notice, please see Senate Bill 2221).
Proof that the notice was sent to the secured party or parties must be filed with the filing office along with the affidavit. The filing office will not accept the affidavit without proof of notice.
Filing office files termination statement
After accepting the affidavit, the filing office will file a termination statement with respect to the financing statement. The termination statement will become effective 30 days after it’s filed.
Secured party can bring an action against affiant
A secured party of record identified in the financing statement can bring an action against the person who filed the affidavit, asking the court to determine if the financing statement was permitted to be filed. This action has to be brought no later than 90 days after the termination statement was filed.
Court can order financing statement to be terminated or reinstated
If an action is brought, the court may order preliminary relief, including an order suspending the termination statement from taking effect until a more final order or judgment can be issued. (If the court does so, the filing office will file an amendment to the financing statement indicating the termination statement was suspended).
Subsequently, the court can order the suspension to end, in which case the termination statement will become effective. Or the court can determine that the financing statement was permitted to be filed, in which case the financing statement will be reinstated. In response, the filing office will file an amendment to the financing statement indicating either that the termination statement is effective or that the financing statement is reinstated.
Effect of the financing statement being reinstated
A reinstated financing statement is effective from the date the financing statement was initially filed and is considered to have never been ineffective against all persons and for all purposes except against a purchaser of the collateral who gave value in reliance on the termination statement.
If the financing statement lapsed during the period of termination, a secured party can file a continuation statement within 30 days after reinstatement, and the continuation statement will have the same effect as if it had been filed during the six-month period otherwise required for filing continuation statements.
Affidavits are ineffective with respect to a regulated lending institution
An affidavit is not effective with respect to a financing statement filed by or on behalf of a regulated lending institution. The regulated lending institution has to notify the filing office that it’s a regulated lending institution no later than 90 days after the termination statement is filed. After the notice is received, the termination statement will become ineffective, and the filing office will file an amendment to the financing statement indicating that the financing statement has been reinstated.
A regulated lending institution is defined as an entity in the business of extending credit or acquiring, purchasing, selling, brokering, or servicing loans or other extensions of credit that is subject to licensure, regulatory oversight, or examination by a state or federal agency. It includes, among others, banks, savings associations, credit unions, consumer finance companies, insurance companies, and investment companies. (For the complete list of entities identified as qualifying, see Senate Bill 2221.)
Related resources:
UCC Searches and Filings
UCC Search and Filing Services for Law Firms
UCC Services for Corporations
UCC forms: What you need to know
