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We have a loan officer who filled out a loan note for a commercial loan and entered “security agreement” as the collateral for the loan on the note. The underlying security agreement listed trucks and trailers as collateral. Is this sufficient to secure our loan? – IBA Compliance Connection

We have a loan officer who filled out a loan note for a commercial loan and entered “security agreement” as the collateral for the loan on the note. The underlying security agreement listed trucks and trailers as collateral. Is this sufficient to secure our loan?

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Whether the bank has a security interest in the vehicles depends on whether the bank has an enforceable security agreement under the UCC. As stated above, a security agreement is considered enforceable if the bank gave value to the borrower, the debtor has rights in the collateral, and the security agreement adequately describes the collateral. 810 ILCS 5/9-203(b). A description of collateral in the security agreement is considered sufficient “if it reasonably identifies what is described.” 810 ILCS 5/9-108. If the security agreement itself fulfills those conditions, the bank should be secured.