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Legislative Updates

Jan 9, 2001
During the final days of the 106th Congress in December, Congress
gave final approval to legislation to revise the federal Bankruptcy Code.
As promised, however, President Clinton vetoed the legislation because of
objections to some of the consumer bankruptcy provisions of the legislation.
As passed, this legislation included language amending Section 546©
of the Bankruptcy Code to expand the period in which unsecured trade
creditors may reclaim goods sold to insolvent buyers. The legislation
expands this period from the present 10 days to 45 days. CFA, working with
House and Senate staff and with representatives from trade creditors John
Deere and Maytag successfully added language to the legislation making
it clear that any collateral encumbered by a security interest may not
be reclaimed.
It is expected that bankruptcy reform will again be considered in
the 107th Congress which convened on January 3, 2001. Because of election
results and internal rules limiting the terms of committee and subcommittee
chairmen, the major players on bankruptcy in the House and Senate changed
with the new Congress. Senator Charles Grassley (R-IA), sponsor of the
Senate bankruptcy legislation and author of the reclamation expansion
provision of that bill, is leaving the chairmanship of the subcommittee in
charge of bankruptcy legislation to take over the Senate Finance Committee.
He is expected to be replaced by Senator Jeff Sessions of Alabama.
On the House side, the chief sponsor of bankruptcy legislation there,
Representative George Gekas (R-PA) must relinquish his chairmanship of the
House Judiciary Committee's Administrative Law Subcommittee, which oversees
bankruptcy legislation, due to House rules which limit terms of committee
and subcommittee chairmen. The new chairman of the subcommittee will
not be determined until early January.
Due to these changes, CFA will undertake efforts to educate the new
subcommittee chairs and their staff on the asset-based lending industry in
general and on reclamation in particular. CFA will begin these education
efforts early in January to insure that any new bankruptcy legislation does
not contain provisions that would harm our members' ability to
conduct business.
In addition, CFA will be closely monitoring Congress and federal
regulatory agencies for developments on a number of other issues that may,
either directly or indirectly, have an impact on asset-based lending. These
issues include privacy of financial services data, registration of security
interests in copyrighted collateral, use of credit reports for commercial
lending, predatory lending, and the treatment of asset-based loans by the
Office of the Comptroller of the Currency.
At the state level, the revised Article 9 of the Uniform Commercial
Code (UCC) has been adopted by 28 states and the District of Columbia.
These states include Alaska, Arizona, California, Delaware, Hawaii,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan,
Minnesota, Montana, Nebraska, Nevada, North Carolina, Oklahoma, Rhode
Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington,
West Virginia. The legislation has also been introduced in three states,
Massachusetts, Missouri and New Jersey, so far in 2001. It is expected that
most of the 22 states that have yet to adopt the revised Article 9 will do
so before the revision becomes effective on July 1, 2001.