As industry participants well know, the financing of payment rights, such as accounts receivable, can take many forms, including traditional borrower/lender secured loans, trade receivables sales and other factoring arrangements, and securitizations, which can involve both sales of payment rights and financings secured by such assets. Article 9 of the Uniform Commercial Code can apply to all of these structures. In fact, UCC §9-102(a) (Scope) makes it quite clear that, subject to certain specific exceptions, Article 9 applies to any transaction, regardless of form, that creates a security interest in personal property by contract, as well as to a sale of accounts, chattel payment, payment intangibles or promissory notes.
The basic definitions of Article 9 align with this approach of applying to both an assignment of payment rights and a security interest in such assets. “[S]ecurity interest” in UCC Article 1, §1-201(b)(35) (General Definitions), includes “any interest of a … buyer of accounts, chattel paper, a payment intangible or a promissory note in a transaction that is subject to Article 9.” The definition of “secured party” in Article 9, §9-102(a)(73) (Definitions and Index of Definitions), includes a “person in whose favor a security interest is created or provided for under a security agreement,” as well as a “person to which accounts, chattel paper, payment intangibles or promissory notes have been sold.” Finally, the definition of “debtor” in Article 9, §9-102(a)(28), includes both a “person having an interest, other than a security interest or other lien, in the collateral” and a “seller of accounts, chattel paper, payment intangibles or promissory notes.”
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