22. What authorization is required to file a financing statement?
A secured party must be authorized to file a financing statement against the assets of the debtor. If the debtor is bound by a security agreement, authorization to file a financing statement is implied. If the debtor is not bound (or not yet bound) by the security agreement, the debtor must authenticate the financing statement. This is normally done by signing a confirmation document. If the financing statement is not authorized, it is ineffective and the secured party is obligated to file a termination statement (or the debtor may do so). The UCC provides for a statutory penalty of $500 against the unauthorized filer.
• Discussion: Why do you think the law provides detailed instructions on when a financial statement may be filed and when a party must terminate or withdraw the filing? Should the law allow for a secured party to file a financing statement if the debtor is not yet bound by a security agreement? Why or why not?
• Practice Question: Mark agrees to purchase Eric’s tractor. The parties have signed a promissory not, but have not yet established a written security agreement. Eric goes ahead and files a financing statement to perfect a security interest in the tractor until it is paid. What additional procedures must the parties follow?