3 November 2026
Ohio's New UCC Rules: What Secured Lenders Need To Know
Since October 6, 2026, a filed UCC-1 may no longer keep a lender first in line for certain types of collateral in Ohio. On July 7, 2026, Governor DeWine signed House Bill 195, which adopts the 2022 amendments to the Uniform Commercial Code.1 The bill adds a new Article 12 for digital assets, revises how lenders perfect and prioritize interests in electronic collateral, and adds rules for leases that bundle equipment with services.2
For loans already on the books, Ohio provides a grace period that ends on October 6, 2027.3 Below is a summary of the changes most likely to affect secured lenders and buyers of lease receivables.
A New Category of Property: Controllable Electronic Records
Article 12 creates a new type of property called a controllable electronic record, or CER. A CER is a record stored in an electronic medium that can be subjected to control.4 The definition excludes deposit accounts, electronic money, investment property, and electronic copies of chattel paper, since each of those has its own rules.5 Payment rights tied to a CER are called controllable accounts and controllable payment intangibles.6
For collateral purposes, a CER falls within the Article 9 definition of a general intangible.7 Lenders should still review their security agreements and financing statements to confirm the collateral descriptions reach these new asset types.
Control Now Beats Filing
A lender may perfect a security interest in a CER, controllable account, or controllable payment intangible by filing a financing statement or by obtaining control.8 A secured party with control has priority over a conflicting secured party that lacks control.9 A UCC-1 still perfects, but it may not put a lender first in line against a competitor that holds control.
A person has control when the record or its system gives that person the power to enjoy substantially all the benefits of the record, the exclusive power to block others and to transfer control, and a way to identify itself as holding those powers.10 A lender can also hold control through a custodian that acknowledges it holds control on the lender's behalf, as long as the custodian is not the party that transferred the interest.11 For controllable accounts and controllable payment intangibles, a lender has control when it controls the CER that evidences them.12
A Filing Is Not Notice to a Qualifying Purchaser
Article 12 protects buyers who obtain control. A "qualifying purchaser" is a buyer that obtains control of a CER for value, in good faith, and without notice of a competing property claim.13 A qualifying purchaser takes the CER free of competing property claims.14 The same protection extends to controllable accounts and controllable payment intangibles.15 A filed financing statement does not count as notice of those claims.16 Lenders relying on a filing alone should understand that it will not stop a qualifying purchaser from taking the asset free and clear.
Electronic Money Has Its Own Rules
Under the UCC, "money" is a medium of exchange authorized or adopted by a government.17 Cryptocurrency that existed before any government adopted it, such as Bitcoin, is not "money" under these rules, though it may qualify as a CER.18 Electronic money is money in electronic form.19 A security interest in electronic money can be perfected by control alone, not by filing.20 A transferee that obtains control of electronic money takes it free of a security interest, unless the transferee acted in collusion with the debtor.21
Article 12 also protects a lender that takes control. Suppose a borrower pledges bitcoin it bought on the open market, and the bitcoin later turns out to have been stolen from its true owner in a hack. Under the old rules, the borrower had no rights in stolen property, so the lender’s security interest could fail when the owner came forward. Under Article 12, a lender that obtains control for value, in good faith, and without notice of the theft is a qualifying purchaser.22 It takes its interest free of the owner’s claim.23 A lender that files a UCC-1 and never takes control receives no such protection, and its filing does not put later purchasers on notice of its own claim.24
To secure this protection, a lender should take control at closing rather than after default. It can do so by holding the private keys, joining a multisignature arrangement that gives it the power to block transfers, or having a custodian acknowledge that it holds control on the lender’s behalf.25 The lender should also confirm it has no notice of a competing claim before it advances funds, since notice defeats qualifying purchaser status.
Chattel Paper: Every Authoritative Copy Counts
Many equipment leases qualify as chattel paper. A lease is chattel paper when the predominant purpose of the deal was to give the lessee possession and use of the goods.26
To perfect by possession and control, a lender must possess each authoritative paper copy and control each authoritative electronic copy.27 Perfection begins when the lender has both, and it lasts while the lender keeps both.28 For electronic copies, the system must name the lender as assignee of the authoritative copy, prevent changes to the named assignee without the lender's consent, and mark every other copy as nonauthoritative.29 A purchaser that gives new value and takes possession and control on these terms can gain priority over certain competing security interests.30
Bundled Leases: Separating Goods From Services
Many leases combine equipment with software, maintenance, or other services under one payment. In a hybrid lease where the goods do not predominate, Ohio's lease article applies to the goods aspects of the deal rather than the transaction as a whole.31 In that situation, the finance lease rule making the lessee's promises irrevocable reaches the payments for possession and use of the goods.32
That rule matters because, once the lessee accepts the goods under a commercial finance lease, its promises become irrevocable and independent, and they bind third parties, including assignees.33 The statute does not affect the validity of a lease clause that makes the lessee's promises irrevocable, so lenders should review those clauses on their own terms.34
Which State's Law Applies
The amendments add new choice of law rules for electronic collateral. For a CER, the law of the record's own jurisdiction governs perfection and priority.35 The law of the debtor's location still governs perfection by filing and automatic perfection when a controllable payment intangible is sold.36 For electronic chattel paper, the rules of the system holding the record can set the governing jurisdiction, while the debtor's location governs perfection by filing.37 A contract's choice of law clause cannot override these provisions.38
Suppose a Cleveland manufacturer pledges bitcoin held in its own wallet to secure a line of credit. The lender must look in two places. First, for perfection by control and priority, the law of the CER’s jurisdiction governs.39 That jurisdiction comes from a waterfall: the record itself, then the system’s rules, and if neither names a jurisdiction, the District of Columbia.40 Bitcoin’s protocol names no governing jurisdiction, so District of Columbia law governs whether the lender has control and whether it has priority.41
Second, for perfection by filing, the law of the debtor’s location governs.42 Because the manufacturer is an Ohio corporation, the lender files its UCC-1 in Ohio. If the same manufacturer were a Delaware LLC operating in Cleveland, the lender would file in Delaware instead.43 Many digital assets name no jurisdiction, so the District of Columbia default will often apply, and lenders should check each asset’s terms rather than assume Ohio law governs.
Existing Deals and the October 6, 2027 Adjustment Date
The transition rules protect interests created before the effective date. An interest that already meets the new requirements stays perfected without further action.44 An interest that does not meet them stays perfected until the earlier of the date it would have lapsed under the old law or the adjustment date.45 After that point, it remains perfected if the lender satisfies the new requirements in time.46 Ohio's adjustment date is one year after the effective date.47 Other states set their own effective and adjustment dates, so lenders with multistate portfolios should review each state on its own.48
Lender Checklist
- Identify loans secured by crypto, electronic payment rights, or electronic chattel paper.
- Obtain control of CERs and electronic money where possible.
- Confirm security agreements and collateral descriptions reach the new asset categories.
- For chattel paper, secure every authoritative paper copy and electronic copy.
- Separate goods payments from service payments in bundled leases.
- Check which state's law governs each type of electronic collateral.
- Review existing deals before October 6, 2027, and track earlier lapse dates.
In Conclusion: Act Before a Dispute Arises
The new rules reward lenders that act early. Taking control of electronic collateral, securing every authoritative copy, and reviewing existing files now can keep a competing creditor from moving ahead later.
Our team are constantly monitoring changes within the industry. Thank you to Weltman Law Clerk Elizabeth Santiago for her research on this Weltman Insight! If you have questions on Weltman’s Recovery Solutions, feel free to connect with our team at any time.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship, or be legally binding in any way.