Important provisions in Article 8 of the Uniform Commercial Code (UCC) contain highly problematic elements that undermine Americans’ individual rights and threaten the stability of the U.S. economy. This Tip Sheet will provide a brief description of those troubling areas of the UCC and propose a set of related concrete policy solutions for lawmakers.

The UCC was created in the mid-twentieth century by the Uniform Law Commission (ULC)—an influential organization of practicing lawyers, judges, legislators, legislative staff, and law professors. The ULC frequently proposes updates and revisions to the UCC to this day, and it, along with the American Law Institute, is the driving force behind the vast majority of UCC legislative proposals. According to its website, the ULC “provides states with non-partisan, well-conceived and well-drafted legislations that brings clarity and stability to critical areas of state statutory law.”

The ULC notes that the Uniform Commercial Code “is a comprehensive set of laws governing all commercial transactions in the United States.” The ULC further explains, “It is not a federal law, but a uniformly adopted state law. Uniformity of law is essential in this area for the interstate transaction of business. Because the UCC has been universally adopted, businesses can enter into contracts with confidence that the terms will be enforced in the same way by the courts of every American jurisdiction. … For this reason, the UCC has been called ‘the backbone of American commerce.’”

As the ULC has rightly explained, the UCC is a vital set of laws that allows for commercial activity to be conducted in a relatively cohesive manner across all 50 states. Because commercial activity and technology are always changing, it is prudent for lawmakers to occasionally update the UCC.

Unfortunately, because the UCC is dense and complicated, very few people and organizations understand it. Over the past few decades, the ULC and others have taken advantage of this confusion by implementing changes to the UCC that few people in the public fully grasp or even know about. Furthermore, because the ULC has a longstanding positive reputation among state legislators, policymakers have made several changes to the UCC that have been proposed by the ULC without fully understanding the ramifications of their decisions.

Perhaps the most egregious example of this relates to amendments made to UCC Article 8, which focuses on investment securities. These amendments, which were passed in the 1990s, have abrogated Americans’ property rights to their own securities, including but not limited to those contained within retirement accounts, such as 401(k) and IRA accounts.

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