Ohio bill would decide who gets paid first on digital collateral

Ohio lawmakers are rewriting a narrow but consequential part of the Uniform Commercial Code, the rulebook that decides how secured lending works when money or rights are pledged as collateral. The update says the local law of a bank’s jurisdiction governs perfection, the effect of perfection or nonperfection, and priority for a security interest in a deposit account maintained with that bank, even if the deal has no other tie to that state. The same idea would apply when chattel paper exists only as an authoritative electronic copy, or as both an authoritative electronic and tangible copy.

When the file is digital

That matters because priority decides who gets paid first when a borrower defaults or a dispute breaks out. If a loan or lease is documented in electronic chattel paper, the measure would point to the chattel paper’s jurisdiction for the governing law, giving lenders and businesses a clearer answer when value lives in a record rather than a folder.

The net gets wider

The bill also broadens Ohio’s definition of bank to include savings banks, savings and loan associations, credit unions and trust companies. That brings more deposit-taking institutions into the same choice-of-law framework, so the rules do not stop at traditional commercial banks.

The change sits inside a broader set of Revised Code revisions, but the commercial-law pieces are the part that matter most to banks, lenders and businesses trying to sort out priority before a dispute turns expensive.

A cleaner answer for disputes

This is less about creating new rights in digital assets than about sorting out the plumbing behind them. Recorded votes show the bill cleared a floor vote. For anyone financing property through a secured deal, the point is certainty: when the collateral is electronic, the law still has to say who stands first in line.