For commercial and consumer transactions, RA9 provides "safe harbor" disposition notification forms. Rev. 9-613 and 614; Ark. Code Ann. 4-9 612(b). There is also a tide clearing mechanism that provides a transfer of record of titled collateral to a purchaser at a foreclosure sale. Rev. 9-619; Ark. Code Ann. 4-9-619.
iii. Retention of Collaural to Sntisfj Secured Debt: Old Article 9 allows a secured party ro retain collateral in satisfaction of a secured debt, subject to written notice and objection procedures. 9-50 I (3)(c); 9-505(2). RA9 rerains and modifies this remedy. First, a secured party in a commerciaJ transaction may retain collateral to satisfy a secured debt even when the secured parry is not in possession of the collateral. Rev. 9 620(a)(3); Ark. Code Ann. 4-9-620(a)(3). The notification by the secured parry of intent to retain the collateral in satisfaction may be an "authenticated" notice, rather than written, and the debtor may object in 20, nor 2 I, days. Rev. 9-620(a) and (c); Ark. Code Ann.-9-620(a) and (c). As with old Article 9, the debtor may waive its rights to notice or agree to retention. but only after default. Rev. 9-602(10); Ark. Code Ann. 49-602(10). The secured party is obligated ro inform other secured parries and lienholders of records of its intention to retain the collateral. Rev. 9-62 I; Ark. Code Ann. 4-9621. If the debtor, other secured party, or lienholder makes a written object to retention. the secured parry does not have ro dispose of the collateral, but it cannot retain the collateral ro satisfy the secured debt. Rev. 9-620(a)(4); Ark. Code Ann. 4-9620(a)(4). Under RA9, the secured party may now retain the collateral in partial satisfaction of the secured debt only in commercial (not consumer) transactions. Rev. 9-620; Ark. Code Ann. 4- 9-620. The process of retaining collateral in satisfaction wilJ not be recognized unless the secured parry takes the affirmative steps required in Rev. 9-620. Rev. 9-620(b); Ark. Code Ann. 4-9-620(b). Consistent with old Article 9 is the prohibition on retaining collateral in satisfaction with certain consumer goods where a significant pan of the purchase price of certain consumer goods has already been paid. Rev. 9-620(e); Ark. Code Ann. 4-9620(e). B. Application of noncash proceeds - If a
secured parry receives noncash proceeds (defined at Rev. 9- I02(a)(58Âť through the process of collection or disposition. the secured parry may value these proceeds and apply them to the debt in a commercially reasonable manner. Unless the secured parry's failure to value and apply such proceeds to the secured debt is commercially unreasonable, the secured parry may reduce and collect or dispose of the proceeds, as RA9 collateral. until they have been converted to cash for application of the secured debt. Rev. 9-608(a)(3) and 615(c); Ark. Code Ann. 4-9-608(a)(3) and 6 I5(c). C. Surplus or deficiency - In a secured transaction that is a sale of accounts, chattel paper. payment intangibles. or promissory notes, unless otherwise agreed, the debtor is not entitled to a surplus nor liable for a deficiency. Rev. 9-608(b) and 615(e); Ark. Code Ann. 4-9-608(b) and 615(e). D. NonpcompUance - RA9 adopts what is known as the "rebuttable presumption" rule for commercial transactions where the secured parry fails to comply with the enforcement provisions of Article 9. In the event a secured parry forecloses improperly, and then brings an action for a deficiency against the debtor. RA9 presumes that the vaJue of the collateral equals the entire secured debt unless the secured parry can rebut this presumption. Rev. 9-626(a)(3); Ark. Code Ann. 4-9-626(a) (3). Revised Article 9 does not specify the process to be used in consumer transactions. E. Status of guarantors - RA9 requires that disposition notifications be given to guarantors and secondary obligors. Rev. 961 I(c)(2); Ark. Code Ann. 4-9-61 1(c)(2). This notification cannot be waived by the guarantor or secondary obligor until after default. Rev. 9-624(a); Ark. Code Ann. 49-624(a). If [he guaranror or secondary obligor is not known to the secured parry, the secured parry is nOt liable for Failure to notify. Rev. 9 628(a) and (b); Ark. Code Ann. 9-628(a) and (b). F. Insider dispositions - RA9 protects the debtor from situations where a secured parry. someone related to a secured parry, or a secondary obligor acquires collateraJ at a foreclosure sale which coUects proceeds that ace significantly lower than me proceeds that would have been realized through comparable sale to an unrelated purchaser. RA9 defines a person rdated to a secured party at 9- I02(a)(63). See Ark. Code Ann.
4-9 I02(a)(63). Ifsuch a sale takes place, the deficiency that remains must reAect a credit to the debtor for the higher amount of proceeds that would have been paid through a sale to the hypothetical unrelated purchaser. Rev. 9-615(f); Ark. Code Ann. 4 9-615(f). G. Consumer provisions - RA9 contains many proVIsions with special rules governlllg consumer transactions. A consumer transaction is defined as a transaction where an individual i.ncurs an obligation primarily for personal, family. or household purposes. a security interest secures the obligation. and any of the collateral is held primarily for personal, family, or household purposes. Rev. 9102(a)(26); Ark. Code Ann. 4-9102(a)(26). Consumers receive various special notices III connection with foreclosure. For example, the 10 days per se reasonable notice rule for notice of the secured parry's disposition of collateral does nor apply to consumer collateral. Rev. 9-6 I2(b); Ark. Code Ann. 4-9-612(b). A consumer debtor must be provided with an explanation of the calculation of any deficiency owed prior to the secured parry's demand for paymenr of such deficiency. Rev. 9-616; Ark. Code Ann. 4-9-616. A secured party cannot retain collateral in possession of a consumer debtor and cannot retain such collateral in partial satisfaction of a secured debt. Rev. 9620(a)(3) and (g); Ark. Code Ann. 9620(a)(3) and (g). A consumer debtor can never waive his right of redemption, even following default. Rev. 9-624(c); Ark. Code Ann. 9-624(c). Finally, the courts are free to adopt any rule (i.e., rebuttable presumption. offset, or absolute bar) when it comes to deficiencies in consumer transactions; the "rebuttable presumption" rule governing deficiencies in commercial transactions does nOt apply. Rev. 9-626(a); Ark. Code Ann. 4 9-626(a). H. Exclusions The enforcement provisions in Parr 6 of RA9 do not apply to true co-signors or buyers ofaccounts, chattel paper, payment intangibles, or promissory notes, except a buyer's obligation to use commercial reasonableness in collecting collateral when the buyer has a right of chargeback on uncollected collateral or full or limited credit recourse to the debtor. Rev. 9-601(g) and 607(c); Ark. Code Ann. 960 I(g) and 607(c).
I'll. 11,1'1. mall 210 I
T~! ArkllSll La~w
II