Establishing a central filing system relating to security interests in farm products, providing fees, and including contingent implementation and effective date provisions

CENTRALIZED FILING SYSTEM. This bill creates a centralized, statewide filing system (system) for security interests in farm products to notify buyers of farm products subject to an attached security interest.9102). The system must be certified by the United States department of agriculture. The bill allows a person who has a secured interest attached to farm products to complete and file a document referred to as an effective financing statement or a statement amending, continuing, or terminating the effective financing statement, with the secretary of state. The secretary must compile information contained in the effective financing statements into a master list organized according to farm products which the secretary must regularly distribute to buyers of farm products registered with the secretary. The secretary may also respond to verbal or written inquiries by buyers including unregistered buyers and deliver a written confirmation to inquiring buyers regarding whether a farm product is subject to a security interest. If a buyer registers with the secretary prior to the purchase of farm products, the registered buyer takes subject to the security interest only if the secured party has filed an effective financing statement that covers the farm products being sold, unless the registered buyer secures a release of the security interest. If a buyer fails to register with the secretary, the buyer takes subject to the security interest only if the secured party has filed an effective financing statement that covers the farm products, and the buyer could have discovered the existence of the effective financing statement by conducting an inquiry and receiving a response and confirmation. The bill authorizes the secretary to establish fees for secured parties filing effective financing statements and buyers registering with the secretary. The secretary must adopt rules as necessary to implement, administer, and enforce the provisions of the system. The system becomes effective on the first business day occurring days after certification by the United States department of agriculture and publication of three successive notices in the Iowa administrative bulletin. EFFECTIVE DATES. The bill takes effect July 1, 2022, except for the provision relating to contingent implementation which takes effect upon enactment. BACKGROUND.9320). However, notwithstanding this exception, a buyer who purchases a farm product from a person engaged in farming operations may not take free of a security interest. §1631), preempts the state’s article requirements by providing that a buyer in the ordinary course of business, a commission merchant, or a selling agent (all classified under the term “buyer”) may buy farm products without being subject to a security interest created by the seller but only if the buyer does not have actual or constructive notice of that security interest. The federal law allows states to elect between two notification options: (1) Iowa’s current law requiring the secured party to deliver direct notice to potential buyers of a secured party’s interest in the farm products within one year prior to sale, or (2) the system described in the bill. In either case, the federal law does not supersede article requirements that establish priorities among creditors.