Digital records could decide who gets paid first in Ohio

Ohio is updating Article 9 of the Uniform Commercial Code, the lending rulebook that decides who gets paid first when a borrower defaults. The bill would give priority to a secured party that has control of a controllable account, controllable electronic record or controllable payment intangible, and it adds a control test for electronic money.

That matters because in a fight over collateral, the winner is not just the person with the best paperwork. It is the party that can prove control of the asset itself. In practical terms, that is meant to give lenders, banks and other creditors clearer ground when value moves through digital records instead of a file cabinet.

When control beats paper

Under the bill, a secured party with control of a controllable account, controllable electronic record or controllable payment intangible would have priority over a conflicting secured party without control. That is the key legal edge in a default or another dispute over who is first in line.

The update also spells out that a person has control of electronic money only if the money, or the system or record tied to it, gives that person the ability the law requires. Ohio’s UCC also defines a bank to include savings banks, savings and loan associations, credit unions and trust companies, making the new framework reach a broad set of lenders.

What counts as collateral now

The point of the bill is not a general cleanup. It reaches several UCC sections at once, including 1309.204, 1309.304, 1309.316, 1309.332, 1309.509, 1309.613 and 1309.621, and it ties those changes to modern payment assets that do not fit old paper-based habits very well.

The measure is carried by a bipartisan pair, Representative Dani Isaacsohn, a Democrat, and Representative Adam Mathews, a Republican. Recorded votes show the bill cleared a floor vote without opposition.