American Bar Association approves uniform act on debt counseling

Daily Record and the Kansas City Daily News-Press, Feb 22, 2006 by Missouri Lawyers Weekly Staff

Four uniform acts, dealing with issues ranging from the oversight of debt counseling services to a new statute on the titling of motor vehicles, were approved last week by the American Bar Association's House of Delegates at its Midyear Meeting in Chicago. Each uniform act was drafted and approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 2005.

One of the approved acts deals with debt counseling. The Uniform Debt-Management Services Act provides guidance and regulation to the debt counseling industry. Consumer debt counseling services have become a critical concern since Congress passed bankruptcy reform legislation last year. Under the federal act already in effect, many bankrupt consumers will be forced to seek consumer debt counseling as part of bankruptcy proceedings.

The Act applies to both consumer debt counseling services and debt management services (debt counseling services generally help a consumer repay all of his or her debt, while debt management services generally attempt to persuade creditors to settle for less than the full amount of the consumer's debt). The Act is a comprehensive statute that provides rules for, among other things, registration requirements, bond requirements, disclosure requirements (including a list of goods and services - and the charges for each - that the agency will provide to the consumer), and penalties for non-compliance.

Another act that the ABA House of Delegates approved deals with the issue of vehicle title registration. The Uniform Certificate of Title Act provides rules for the transfers of interests in motor vehicles (the Act does not apply to mobile homes or water craft). Each year, close to 70 million motor vehicles are titled in the United States.

The Act, by providing improved administrative rules and remedies governing title issues, creates a consistent legal structure to facilitate efficient resolution of common titling issues and the efficient handling of title-related transactions. The Uniform Act provides basic procedures for registering certificates of title for motor vehicles. It is designed to incorporate electronic registrations of title. It is also designed to incorporate electronic title searches for motor vehicles. It is also intended to enable state coordination with federal initiatives to prevent title and odometer fraud.

The Uniform Assignment of Rents Act will bring consistency to commercial real property transactions by establishing a comprehensive statutory model for the creation, perfection, and enforcement of a security interest in rents. Real estate law generally does not provide a consistent creditor's right to rents when a debtor on a real estate loan on property with tenants then defaults on payment. Creditors normally take an assignment of rents upon default as part of the credit transaction, but enforceability of such assignments and their priority over other creditors is often in doubt.

The Uniform Assignment of Rents Act seeks to remedy this problem by establishing a statutory model for the creation, perfection, and enforcement of a security interest in rents. An assignment of rents creates a security interest in the rents that may be perfected by a filing in the appropriate real estate records. Perfection establishes priority in collection of the rents over competing creditors. Tenants may be required, upon specified notice, to pay rents directly to the assignee as a means of enforcement of the security interest. A receiver may be appointed in the event the assignee can show that direct enforcement is insecure.

This article was originally published in Missouri Lawyers Weekly, another Dolan Media publication.