Jerry Kopel


No use pretending there was anything but acrimony on this transmogrification. It was a fight between Secretary of State Vikki Buckley and the Colorado Bar Assn. (CBA) over power, money, and state employees. And in the end, CBA won.

The bill is SB 65, by Sen. Peggy Reeves, D-Ft. Collins, and Rep. Gloria Leyba, D-Denver. The subject? The Central Indexing System (CIS) which is supposed to protect creditors who use collateral as security for loans and sales to debtors.

Now before you stifle a yawn and turn the page, this bill affects ANYONE who has ever purchased business goods on credit, or borrowed money, or will in the future. Does a creditor loan money or sell goods on credit to you because you're a "good person"? The creditor tries to make sure that if you default on the loan or sale, there'll be property to repossess, reducing the credit loss.

However, in recent years, the creditor couldn't be certain the property to be used as collateral wasn't also presently mortgaged to another creditor. If that had happened, the newest creditor would be out money AND property.

The reason a creditor couldn't be certain was because of a really stupid change in the law, supported by the CBA, which allowed a creditor to perfect his security in the collateral by filing in ANY of 64 Colorado counties or the Secretary of State's office. So if you wanted to make a loan or sale within a reasonable time, but you couldn't get complete information from all 64 counties and the Secretary of State, you are REALLY taking a chance the debtor is "a good person".

All the county clerks and recorders and the secretary of state were "supposed" to forward information about security filings to the Central Indexing System. If they did, that could then be the ONLY place a creditor had to contact. Of course, it didn't work. To a major extent, the law was ignored. And when information was sent, it was often late. Last year, in a report to the legislature, the State Auditor sharply criticized the CIS board, the secretary of state and many county clerks and recorders for doing a poor job.

"The value of the current system" wrote the state auditor "is questionable. The CIS database is not complete, accurate, or timely. Searching the database is more complicated than under the previous system." The previous system was easy: Follow the property to the county where the debtor lives.

As for filings under the new system, the CBA Business Section chairman in 1998 admonished its lawyer-members (some of whom had participated in writing versions of the law), "In practice it (the CIS) has been a fiasco."

SB 65 as introduced (and in the final version), doesn't touch the law on motor vehicle liens, or real estate, or timber, minerals, and fixtures. Filing on those items stays with county government.

But the original SB 65 gave control over all other collateral (including loans secured by consumer goods) to the executive director of the department of personnel, who was to run an information system either through his employees or by contract with private parties.

Of course, that took away filings, revenue and power from clerks and recorders, and especially from the Secretary of State's office where almost half of all the filings were being made.

So in Senate Business Affairs, the bill was "amended" to give all the centralized power to receive filings and disburse information to the secretary of state as "central filing officer", with a central information system board to do a lot of the actual work. And that is how SB 65 passed out of Senate Business Affairs and out of Senate Appropriations Committee to second reading.

But on second reading in the Senate, everything went into reverse, with power now TAKEN from the Secretary of State and clerks and recorders and given to a new Central Information System Board to be appointed by the governor, with a central filing officer as their chief employee. In addition, and this was REALLY big, employees were transferred from the secretary of state to the board.

So that's how the bill passed the Senate and House. The State Auditor's office is going to keep watching over the new system. There are going to be four quarterly reports from the CIS board to the legislative audit committee.

"Everything" should be in place by Jan. 1, 2000. When you ask for a loan or purchase to be secured by collateral, it should be as easy as butter sliding down your throat to find out if you're telling the creditor the truth.

Of course, the bill still has to be approved by Gov. Bill Owens. A credible pro-SB 65 source alleges Secretary of State Buckley has already asked the governor to veto the bill. Hopefully, the governor will review the State Auditor's report on the issue.

There were no votes in opposition as the measure passed the House with non-substantive amendments. The Senate concurred and repassed the bill with only one vote in opposition: Sen. Ken Chlouber, R-Leadville, who carried some of the earlier Central Indexing System bills that turned out to be fatally flawed laws.

Jerry Kopel writes a column for the Statesmas based on 22 years past experience as a state legislator.

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