HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 901 Secured Transactions
SPONSOR(S): Judiciary Committee, Fabricio and others
TIED BILLS: IDEN./SIM. BILLS: SB 978
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Civil Justice Subcommittee 18 Y, 0 N Mawn Jones
2) Insurance & Banking Subcommittee 18 Y, 0 N Sellas Lloyd
3) Judiciary Committee 20 Y, 0 N, As CS Mawn Kramer
SUMMARY ANALYSIS
A security interest arises when, in exchange for a loan, a borrower pledges as collateral in a security
agreement specified assets he or she owns that the lender may take if the borrower defaults on the loan. A
security interest also assures the lender that, if the borrower enters bankruptcy, the lender may be able to
recover the loan’s value by taking the asset. Under Florida law, a description of an asset, whether or not the
description is specific, is sufficient to pledge the asset under a security agreement if it reasonably identifies
what is described. However, a description of assets in general terms, such as “all the debtor’s assets,” “all the
debtor’s personal property,” or similar phrasing, does not sufficiently identify the collateral for purposes of a
security interest.
Florida Law protects certain assets from legal process so that they remain out of a creditor’s reach, including:
Funds held in individual retirement accounts (“IRA”) and other tax-exempt accounts.
The cash surrender value of a life insurance policy and the proceeds of an annuity contract.
Funds held in qualified tuition programs and medical, Coverdell education, and hurricane savings
accounts.
Disability income benefits.
A deceased person’s wages and unemployment compensation benefits.
Homestead property and certain personal property items.
Social security benefits; unemployment compensation, or public assistance benefits; veterans’ benefits;
alimony, support, or separate maintenance; and stock or pension plans under specified circumstances.
Historically, exempt assets not specifically pledged in a security agreement remained exempt from a creditor’s
reach. However, a recent Eleventh Circuit Court of Appeals decision broke with this rule by holding that a
security agreement granting a security interest in “all assets and rights of the Pledgor” pledged the debtor’s
IRA as collateral for a loan even though the IRA was not specifically identified in the agreement. This decision
may have significant federal tax consequences for Floridians, as the use of certain tax-exempt accounts as
collateral for a loan is considered distribution of the funds to the owner, who then owes federal income tax on
the money and may owe a tax penalty for early distribution.
CS/HB 901 provides that a general description only by type of collateral is an insufficient description to pledge
certain statutorily-exempt assets for the purposes of a security agreement.
The bill does not appear to have a fiscal impact on state or local governments.
The bill provides an effective date of upon becoming a law.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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DATE: 3/31/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Security Interests
A security interest arises when, in exchange for a loan, a borrower pledges as collateral1 in a security
agreement2 specified assets owned by the borrower that the lender may take if the borrower defaults
on the loan.3 A security interest also assures the lender that, if the borrower enters bankruptcy, the
lender may be able to recover the loan’s value by taking possession of the pledged assets. 4
Under Florida law, a description of personal or real property, whether or not it is specific, is sufficient for
the purposes of a security agreement if it reasonably identifies what is described.5 An effective
description of collateral pledged in a security agreement identifies the asset by:
Specific listing;
Category;
Type of collateral;
Quantity;
Computational or allocational formula or procedure; or
Any method under which the collateral’s identity is objectively determinable.6
However, a general description of collateral as “all the debtor’s assets,” “all the debtor’s personal
property,” or similar phraseology does not sufficiently identify the collateral for purposes of creating a
security interest.7 Further, a description only by type of collateral is an insufficient description of:
A commercial tort claim;
In a consumer transaction, consumer goods, a security entitlement, a securities account, or a
commodity account; or
An account consisting of a right to payment of a monetary obligation for the sale of real property
that is the debtor’s homestead under Florida law. 8
Asset Exemptions
Florida law protects certain assets from legal process so that they generally remain out of a creditor’s
reach, including:
Funds held in an individual retirement account (“IRA”) and other tax-exempt accounts.9
A life insurance policy’s proceeds.10
A life insurance policy’s cash surrender value.11
An annuity contract’s proceeds.12
Funds held in qualified tuition programs, medical savings accounts, Coverdell education
accounts, and hurricane savings accounts.13
1 “Collateral” means the property subject to a security interest. The term includes proceeds to which a security interest attaches;
accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and goods that are the subject of
consignment. S. 679.1021(1)(l), F.S.
2 “Security agreement” means an agreement that creates or provides for a security interest. S. 679.1021(1)(uuu), F.S.
3 Legal Information Institute, Secured Transactions, https://www.law.cornell.edu/wex/secured_transactions (last visited March 31,
2023).
4 Id.
5 S. 679.1081(1), F.S.
6 S. 679.1081(2), F.S.
7 S. 679.1081(3), F.S.
8 S. 679.1081(5), F.S.
9 S. 222.21, F.S.
10 S. 222.13, F.S.
11 S. 222.14, F.S.
12 Id.
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Disability income benefits.14
A deceased person’s wages, travel expenses, and reemployment assistance or unemployment
compensation payments.15
Homestead property.16
Certain personal property items.17
A debtor’s interest in a motor vehicle, up to $1,000 in value, and any professionally prescribed
health aides.18
Social security benefits; unemployment compensation, or public assistance benefits; veterans’
benefits; alimony, support, or separate maintenance; and stock or pension plans under
specified circumstances.19
The purpose behind such exemptions is to prevent a debtor from being left destitute, and therefore
unable to participate productively in society, or from being unable to meet specified medical,
educational, housing, and other needs, after defaulting on a loan or owing on a judgment. 20 Historically,
exempt assets have remained exempt from a creditor’s reach unless specifically pledged as collateral
in a security agreement.21
Recent Case Law
In Kearney Constr. Co., LLC v. Travelers Casualty & Surety Co. of America, the federal Eleventh Circuit
Court of Appeals broke with the historic tradition of maintaining asset exemptions unless the asset is
specifically pledged.22 In Kearney, the debtor obtained a line of credit and pledged the following
collateral in the security agreement:
[A]ll assets and rights of the Pledgor, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof, all goods (including
inventory, equipment and any accessories thereto), instruments (including promissory
notes)[,] documents, accounts, chattel paper, deposit accounts, letters of credit, rights,
securities and all other investment property, supporting obligation[s], and contract or
contract rights or rights to the payment of money, insurance claims, and proceeds, and
general intangibles.23
The Court held that this language was an “unambiguous pledge” of “all assets and rights” of the debtor,
including the debtor’s IRA, even though the IRA was not specifically identified in the agreement. 24
Practically speaking, the Kearney decision makes it possible for a borrower to inadvertently pledge as
collateral for a security agreement an asset historically exempt from the reach of creditors under Florida
law.25 This may affect Florida consumers with security agreements containing general language similar
to the language at issue in Kearney.
13 S. 222.22, F.S.
14 S. 222.18, F.S.
15 Ss. 225.15 and 225.16, F.S.
16
Ss. 222.01-222.05, F.S.; Art. X, s. 4, Fla. Const.
17 S. 222.061, F.S.
18 S. 222.25, F.S.
19 Ss. 222.201 and 222.21(1), F.S.
20 National Bankruptcy Review Commission, Property Exemptions, https://govinfo.library.unt.edu/nbrc/report/05ccons.html (last visited
March 31, 2023).
21 Real Property, Probate, and Trust Law Section of the Florida Bar (“RPPTL”), White Paper (Jan. 26, 2021); see, e.g., Havoco of Am.
Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001); Connor v. Seaside Nat’l Bank , 135 So. 3d 508 (Fla. 5th DCA 2014); Killian v. Lawson, 387 So.
2d 960 (Fla. 1980).
22 See 795 Fed. Appx. 671 (11th Cir. 2019). The Kearney case is an unpublished opinion of the Federal Court of Appeals for the
Eleventh Circuit. Opinions that the Eleventh Circuit’s panel of judges believes to have no precedential value are not published. Although
unpublished opinions may be cited as persuasive authority, they are not considered binding precedent. Fed. Re. App. P. 36, Internal
Operating Procedure 6; see also 11th Cir. R. 36-2.
23 795 Fed. Appx. at 673-74.
24 Id. at 674. The borrower testified that he did not intend to pledge the IRA; however, the lower court rejected such testimony because
it was inconsistent with the borrower’s earlier court filings. Id.
25 The exception is homestead property, as a waiver of such rights must be “knowing, voluntary, and intelligent” to have any eff ect. See
RPPTL, supra note 21; see also Chames v. DeMayo, 972 So. 2d 850 (Fla. 2007) (citing State v. Upton, 658 So. 2d 86 (Fla. 1995)).
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The decision could also have significant federal tax implications, as the use of certain tax-exempt
accounts as collateral for a loan is considered a distribution of the funds in the account to the owner,
who then may owe federal income tax on the distribution. 26 The Tax Code also imposes a 10 percent
tax penalty for early distributions from certain tax-exempt accounts.27
Effect of Proposed Changes
CS/HB 901 provides that a general description only by type of collateral is an insufficient description to
pledge as collateral, for the purposes of a security agreement, accounts and other entitlements set forth
in ss. 222.13-222.16, 222.18, and 222.201-222.22, F.S. These include:
Funds held in an IRA and other tax-exempt accounts.
A life insurance policy’s proceeds or cash surrender value.
An annuity contract’s proceeds.
Funds held in qualified tuition programs, medical savings accounts, Coverdell education
accounts, and hurricane savings accounts.
Disability income benefits.
A deceased person’s wages, travel expenses, and reemployment assistance or unemployment
compensation payments.
Social security benefits; unemployment compensation; public assistance benefits; veterans’
benefits; alimony, support, or separate maintenance; and stock or pension plans under
specified circumstances.
The bill provides an effective date of upon becoming a law.
B. SECTION DIRECTORY:
Section 1: Amends s. 679.1081, F.S., relating to sufficiency of description.
Section 2: Provides an effective date of upon becoming a law.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may prevent Floridians from inadvertently pledging as security specified exempt assets and
suffering any related federal tax consequences.
26 I.R.C. 408(e)(4) and (d)(1); I.R.C. 72(p)(1)(B).
27 I.R.C. 72(t).
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D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not Applicable. This bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
Not applicable.
C. DRAFTING ISSUES OR OTHER COMMENTS:
During the 2022 session, the Legislature passed SB 406. SB 406 was identical to HB 901, except that it
contained a provision specifying that the bill was remedial in nature and applied retroactively. The
Governor vetoed SB 406 on June 24, 2022, due to the retroactivity provision, finding that, were the bill
to become law, it would unconstitutionally impair certain vested rights and contracts. 28 However, the
Governor also noted in his veto message that the prospective policy reforms are sound.
HB 901 does not include the retroactivity provision; thus, it applies prospectively.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On March 31, 2023, the Judiciary Committee adopted one amendment and reported the bill favorably as a
committee substitute. The committee substitute deleted language specifying that the bill is intended to
clarify existing law.
This analysis is drafted to the committee substitute as passed by the Judiciary Committee.
28See Governor’s Veto Message (June 24, 2022),
https://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=Veto%20Message.p df&DocumentType=VetoMessageD
ocuments&Session=2022&BillNumber=0406 (last visited March 31, 2022).
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Statutes affected: H 901 Filed: 679.1081
H 901 c1: 679.1081