Epiq Systems, Inc.

Law change minimizes effect of PPSA naming errors

An amendment to Ontario’s Personal Property Security Act (PPSA) will give comfort to car financiers and lessors who accidentally misidentify debtors, says Toronto corporate and commercial lawyer Marlin Horst.

The change in the law, part of Bill 154, Cutting Unnecessary Red Tape Act which recently received Royal Assent, means that a PPSA registration will give the secured party a perfected security interest despite an error in the debtor’s name, as long as the correct vehicle identification number (VIN) is used.

Horst, a partner with the Toronto office of Shibley Righton LLP, tells AdvocateDaily.com that confusion can sometimes arise because the PPSA registration system is searchable by both debtor name and VIN, allowing for discrepancies when a name is wrongly recorded.  

“I like this change because it removes that loophole,” he says.

“It should make things much more practical if you’re searching by VIN,” Horst adds, noting that the vast majority of PPSA registrations relate to a vehicle of some kind.  

He explains that some courts have held that simple errors in the naming of debtors have resulted in creditors losing priority as their security interests remained unperfected due to the mistake.

The new law clarifies in s. 46(1) of the PPSA that certain errors in a financing statement regarding collateral will be “deemed not likely to be misled materially, insofar as the security interest in the motor vehicle is concerned,” as long as the VIN is correct. They are errors in:

  • The debtor’s name; or is incorrectly named
  • The debtor’s date of birth

The Business Law Advisory Council recommended the change last year in a report to the provincial government:

“It is very difficult to accurately name people in our diverse population with different cultural naming conventions, especially as people do not attend in vehicle dealerships or repair facilities with their birth certificates or Canadian citizenship papers, the documents Ontario case law has held are to be used to accurately name people in the computer registry system,” the report reads.

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