A security interest is typically seen in the context of a car loan. A borrower will give a lender a security interest in the car, and it can be repossessed in case the borrower stops making his or her monthly payments. The interest arises upon the signing of a written security agreement. Security agreements are governed by the Uniform Commercial Code, and they have three essential elements. Those are that:
- The security agreement has a value
- The borrower is the owner of the collateral that’s secured
- The borrower signed a security agreement specifically identifying the secured property
The lender must then perfect its security interest by filing it at the appropriate governmental office.
An example of a security agreement
Joe went to the bank and got a $15,000 loan to buy a new car. He stopped making payments when the loan balance was $7,500 because he lost his job. The bank repossessed the car, and it sold the car for what was owed on it. Joe no longer owes anything on the car. The security interest has been satisfied.
The controlling New York Statute
Fraud involving a security interest is a class A misdemeanor and punishable by up to a year in jail, a fine or up to three years probation along with a fine. It’s governed by New York Penal Law section 185.05. Under that statute, a person can be guilty of fraud involving a security interest when or she entered into a security agreement with the right of sale and sells or otherwise disposes of the property without accounting to the lender for the proceeds of the sale. If he or she doesn’t have the right of sale, the collateral can’t be sold or disposed of in a manner prohibited by the security agreement.
An example of fraud involving a security interest
Joe borrowed $20,000 from Charlie. As collateral for the loan, Joe pledged a security interest to Charlie in his 2015 Corvette. The agreed payment schedule on the loan was $1,000 per month. Joe retained possession of the car with authority to sell it pursuant to the security agreement. Eddie saw the Corvette at a car show, and he offered Joe $40,000 for it. Joe accepted the offer and the money. He never told Eddie about the security interest in the car, and he never told Charlie that he had sold the car. Even though he continued to make his $1,000 per month payment to Charlie, Joe could still be found guilty of fraud in a security interest.
Although a conviction for fraud involving a security interest is a misdemeanor, it’s still a serious offense that involves dishonesty and deceit. That conviction could adversely affect present and future employment, educational and housing opportunities. Knowing this, the NYC criminal attorneys from our law firm might bargain for a lesser offense and deferred prosecution without a conviction being entered. The fact that Joe continued to make payments on the Corvette operates in mitigation and in his favor.
Our law firm has years of experience in representing people who are charged with different types of fraud and white collar crimes that don’t involve violence. Never give police a statement or confession. The prosecution has the burden of proof beyond a reasonable doubt. Protect and invoke your rights by contacting us right away at 888-981-9127 after being arrested for any crime alleged to be based on fraud or deceit.