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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
SB2221

Regular Session

Relating to the filing of a fraudulent financing statement in relation to certain secured transactions; authorizing the imposition of a fee.

Government Affairs & Regulatory Compliance Analysis

SB2221: Government Affairs Overview

SB2221 fundamentally shifts the burden of proof in UCC disputes from the debtor to the creditor, effective September 1, 2025. The law creates a "fast-track" administrative process allowing the Secretary of State to extinguish liens based on a debtor's affidavit, bypassing the court system initially. Secured creditors—particularly non-bank lenders—face the immediate risk of losing lien perfection and priority if they fail to respond to certified notices within strict 30-day windows.

Sen. Tan Parker·Senate Bill·Regular Session

Critical
Medium Cost
Effective:2025-09-01
Business Impact

Who SB2221 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: critical

Significant regulatory changes (effective 2025-09-01). Review with your legal and compliance teams to understand implications.

🏭

Manufacturing & Business

Affected business types:

  • Manufacturers
  • Industrial facilities
  • Supply chain companies
  • Logistics providers
View all manufacturing & business legislation
🏦

Banking & Finance

Affected business types:

  • Banks
  • Credit unions
  • Financial services firms
  • Insurance companies
View all banking & finance legislation

Key Operational Considerations

  • 1Default Clauses: You must amend standard loan agreements to define the filing of a false or groundless *Affidavit of Impermissible Filing* by the borrower as an immediate Event of Default.
  • 2Mailroom Protocols: Front-line staff must be trained to flag Certified Mail containing specific keywords (e.g., "impermissible," "fraudulent," "affidavit") for immediate escalation to Legal.
  • 3Legal/Compliance: In-house counsel must be trained on the bifurcation of remedies:

Estimated Cost Impact

mediumModerate costs expected for implementation.

Enforcing Agencies

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SB2221
Critical
Relating to the filing of a fraudulent financing statement in relation to certain secured transactions; authorizing the imposition of a fee.
Critical Compliance Urgency
Requires immediate attention
Cost Impact
Medium
Effective
2025-09-01
Enforcing Agencies
District CourtsSecretary of State
Primary Author: Sen. Tan Parker
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: July 1, 2025 (Internal mailroom and legal intake protocols must be tested and active *before* the law goes live to catch early notices).
  • Agency Rulemaking: The Secretary of State (SOS) must promulgate two critical forms by Sept 1, 2025: the *Affidavit of Impermissible Filing* (for debtors) and the *Notice of Regulated Lending Institution Status* (for banks/insurers). Expect a "regulatory gray zone" in August 2025 where the law is imminent but forms are unpublished.

Immediate Action Plan

  • 1. Update Mail Handling: Establish a "Red Alert" protocol for any Certified Mail referencing UCC filings or affidavits; these must reach Legal within 24 hours.
  • 2. Determine RLI Status: obtain a formal legal opinion on whether your entity qualifies as a "Regulated Lending Institution" under Sec. 9.5185(r). This determines whether you can fix a termination with a form or if you must file a lawsuit.
  • 3. Revise Loan Docs: Insert specific default language regarding the misuse of the Section 9.5185 affidavit process in all new originations starting Q1 2025.
  • 4. Review E&O Insurance: Confirm your policy covers administrative errors resulting in the loss of security interest perfection.

Operational Changes Required

Contracts

  • Default Clauses: You must amend standard loan agreements to define the filing of a false or groundless *Affidavit of Impermissible Filing* by the borrower as an immediate Event of Default.
  • Indemnification: Expand indemnification clauses to explicitly cover legal fees and costs associated with defending against administrative challenges under Texas Business & Commerce Code Section 9.5185.

Hiring/Training

  • Mailroom Protocols: Front-line staff must be trained to flag Certified Mail containing specific keywords (e.g., "impermissible," "fraudulent," "affidavit") for immediate escalation to Legal.
  • Legal/Compliance: In-house counsel must be trained on the bifurcation of remedies:
  • Regulated Lenders (Banks/Insurers): Must be trained to file the *Notice of Regulated Lending Institution Status* within 90 days of a termination.
  • Non-Regulated Lenders (Private Equity/Factors): Must be prepared to file a District Court petition within 90 days to preserve the lien.

Reporting & Record-Keeping

  • Regulated Lending Institutions (RLIs): Prepare a standing file proving your licensure status (e.g., banking charter, insurance license) to attach to SOS filings if your liens are attacked.
  • Audit Trails: Maintain rigid documentation of lien validity and payoff disputes. If a debtor claims a lien is "groundless" because of a disputed payoff, you need immediate access to the ledger to refute the affidavit.

Fees & Costs

  • New Penalties: The civil penalty for filing a fraudulent financing statement has doubled to the greater of $10,000 or actual damages.
  • Litigation Budget: Non-regulated lenders must budget for potential District Court filing fees and counsel costs to defend valid liens against fraudulent administrative termination.

Strategic Ambiguities & Considerations

  • The "Ministerial" Review: While the Fiscal Note implies the SOS will review affidavits for a "reasonable basis," the statute mandates the SOS "shall" file the termination if the form is technically correct. Do not rely on the SOS to police fraud. Assume all properly formatted affidavits will result in lien termination unless you intervene.
  • Definition of "Regulated Lending Institution": Section 9.5185(r) is broad. Fintechs, SPVs, and private credit funds that partner with banks but lack their own direct licensure may fall outside the "safe harbor." If your status is ambiguous, you must operate as a Non-Regulated Lender and prepare to litigate.
  • "Groundless" vs. "Disputed": The law penalizes "groundless" filings. It does not clearly distinguish between a fraudulent lien and a legitimate dispute over whether a debt was fully satisfied. Debtors may weaponize this ambiguity to force lien releases during payoff disputes.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 11, 2025
Passed Senate
May 8, 2025
Passed House
May 28, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsBusiness & CommerceBusiness & Commerce--generalCivil Remedies & LiabilitiesCourtsCourts--districtFinancialFinancial--generalFraudSecretary of StateFees & Other Nontax RevenueFees & Other Nontax Revenue--state
03

Senate Authors

Sen. Tan ParkerRepublican · Primary Author

House Sponsor

Rep. Stan LambertRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

Explore more bills from this author and on related topics

More from Sen. Tan Parker

View all bills by Sen. Tan Parker

Related by Topic

View more Business & Commerce legislation
Quick Reference

Frequently Asked Questions

Common questions about SB2221

Q

What does Texas SB2221 do?

SB2221 fundamentally shifts the burden of proof in UCC disputes from the debtor to the creditor, effective September 1, 2025. The law creates a "fast-track" administrative process allowing the Secretary of State to extinguish liens based on a debtor's affidavit, bypassing the court system initially. Secured creditors—particularly non-bank lenders—face the immediate risk of losing lien perfection and priority if they fail to respond to certified notices within strict 30-day windows.

Q

Who authored SB2221?

SB2221 was authored by Texas Senator Tan Parker during the Regular Session.

Q

When was SB2221 signed into law?

SB2221 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce SB2221?

SB2221 is enforced by District Courts (Expedited hearings for contested filings) and Secretary of State (Administrative termination of liens).

Q

How significant are the changes in SB2221?

The regulatory priority for SB2221 is rated as "critical". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB2221?

The cost impact of SB2221 is estimated as "medium". This may vary based on industry and implementation requirements.

Q

What topics does SB2221 address?

SB2221 addresses topics including business & commerce, business & commerce--general, civil remedies & liabilities, courts and courts--district.

Q

What are the key dates for SB2221?

Key dates for SB2221: Effective date is 2025-09-01. Rulemaking: Must make available a form affidavit for debtors alleging fraudulent filings (Sec. 9.5185(e)). (2025-09-01); May prescribe a form for Regulated Lending Institutions to notify the office of their status to block/reverse terminations (Sec. 9.5185(q)). (2025-09-01). Consult with legal counsel regarding applicability.

Q

What are the penalties under SB2221?

SB2221 establishes the following penalties: civil penalty of Greater of $10,000 or actual damages (previously $5,000) for Intentionally or knowingly presenting a forged, materially false, or groundless financing statement for filing.; criminal penalty of Perjury charges (Class A Misdemeanor to Felony depending on context) for Filing a false affidavit claiming a financing statement is impermissible.. Consult with legal counsel for specific applicability to your situation.

Q

Which Texas businesses are affected by SB2221?

SB2221 primarily affects Texas businesses and commercial enterprises. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026