Priority of Consumers Purchasing from Consumers
What if a Consumer Purchases Goods that are Subject to a Security Interst?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Accounting, Taxation, and Reporting
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Marketing, Advertising, Sales & PR
- Business Management & Operations
- Economics, Finance, & Analytics
- Professionalism & Career Development
Protections for Consumers Buying Collateral from Other Consumers
Buyer in ordinary course protection does not apply to purchases by consumers from consumers (not sellers of goods of the kind). 1-201(9). As such, 9-315(a)(1) states that the security interest continues and 9-320(a) says the buyer takes subject to the security interest.
9-320(b) may offer protection to the buyer if the security interest is not perfected or automatically perfected under 9-309(a). Under 9-320(b) the buyer takes free of the perfected security interest under the following conditions:
- The goods are consumer goods in the hands of the seller;
- The buyer buys without knowledge of the security interest;
- The buyer buys for value;
- The buyer buys for his own personal, family, or household purposes; and
- The secured party has not filed a financing statement covering the goods prior to the purchase.
This is a very limited protection when the secured party does not perfect or relies on the 9-309(a) security interest. Since most sellers of consumer goods depend on 9-309 automatic perfection of a security interest, this can be an effective protection.