The American Financial Services Association, (AFSA) has developed an American National Standard Institute (ANSI) standard that provides guidelines for the creation, storage, and communication (assignment or transfer) of Electronic Chattel Paper for the automotive dealership financing industry. The standard provides guidance for meeting the requirements under Uniform Commercial Code (UCC) Revised Article 9 for establishing control of Electronic Chattel Paper and also addresses aspects of the Electronic Signatures in Global and National Commerce Act (ESIGN), and the Uniform Electronic Transaction Act (UETA).

Electronic Chattel paper is chattel paper that is evidenced by records consisting of information stored in an electronic medium. Control of electronic chattel paper is the functional equivalent of possession of tangible chattel paper and provides the same benefits to the secured party. The standard provides guidance on the requirements for control of Electronic Chattel Paper at the creation, storage, and assignment of Electronic Chattel Paper.

The scope of this standard begins at the time of creation of Electronic Chattel Paper, inclusive of signature capture, and includes the storage and subsequent assignment of the Electronic Chattel Paper. This standard addresses both electronically originated chattel paper as well as that originated via paper and subsequently converted to an electronic medium.

The standard does not endorse a particular technology, process, or system solution and has been designed to allow for flexibility in approach, design, technology, and implementation. The standard:

1. Discusses technical business specifications that will permit the creation, storage, and assignment of Electronic Chattel Paper.

2. Identifies technical business specifications that permit the validity, effect, and enforceability of electronic signatures and contracts executed in an electronic form.

The standard is specific to automotive dealership financing for retail installment sale and lease contracts. However, it may provide direction to other sectors of the financial industry with respect to their electronic processes.

The AFSA standard allows purchasers of Electronic Chattel Paper to apply their business rules to the data and maintain their business model or competitive advantage. Simply put, the standard allows companies to continue to compete without dictating the use of specific technology or processes. More importantly, since standards are transparent, they allow for increased competitiveness, market growth, improvement in services, and improved of customer satisfaction.

The standard also provides a pathway to the capital markets. Issuers of Asset Backed Securities, which include Electronic Chattel Paper, can use the standard as a way to attest that the receivables meet the requirements for control.

For further information please contact John Freeman at jfreeman@ford.com.