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Commercial Law

Electronic Chattel Paper

One of the significant benefits bestowed upon chattel paper financers is the ability to perfect a security interest via possession, and in so doing potentially achieve priority over pre-existing secured lenders who perfected by filing a UCC Financing Statement. Now, the system is moving toward electronic chattel paper. What does this mean?

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Traditional or tangible chattel paper has long been used to finance equipment purchases. One of the significant benefits bestowed upon chattel paper financers is the ability to perfect a security interest via possession, and in so doing potentially achieve priority over pre-existing secured lenders who perfected by filing a UCC Financing Statement. This system generally worked well, and trillions of dollars have been financed in this manner.

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