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Oklahoma Lien Law Changes
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Credit Grantors Must Get Okay
to Pull Consumer Reports |
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 Oklahoma Lien Law Changes
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Pete Stamper, partner in the law firm, Nichols, Wolfe, Stamper, Nally, Fallis & Robertson, Inc. Tulsa, provided some insight on how these changes will affect construction suppliers.
"The 2000 session of the Oklahoma Legislature amended Title 42, Oklahoma Statutes 1991, section 143.1, to add requirements that could affect the rights of subcontractors and material and equipment suppliers to enforce mechanic's liens in order to get paid.
Previously, prior notice of non-payment was not required as a prerequisite to the enforcement of a lien. Now, if the work was not performed or the material or equipment was not furnished under a contract directly with the property owner, a notice is mandatory.
A lien claimant who is owed payment by the prime (general) contactor must send written notice of the unpaid amount to the owner of the property and the prime contractor not later than the tenth day of the third month following each month in which the unpaid labor, materials, or equipment was furnished.
A lien claimant who is owed payment by a subcontractor must send the same written notice not later than the tenth day of the second month following each month in which the unpaid labor, materials, or equipment was furnished.
Failure of the lien claimant to send the required written notice shall render that portion of the lien claim for which no notice was sent invalid and unenforceable.
The amendment to the law makes no mention of the retainage and does not specify the form required for the notice no the method of its delievery."
Confounding this issue further is the fact that the changes appear to have gone into effect as of June 6, 2000 possibly jeopardizing liens filed since that time. An accurate interpretation of the law is subject to test, but for now, suppliers and subcontractors must follow the letter of the law and provide, in writting, the details of the transaction and deliver the notice to the owner and prime (general) contractor/subcontractor in such a manner as to provide proof of the delivery of the notice.
At the association office, we are continuing to gather information about the changes and will inform you as we learn about this issue. In the meantime, we are working on a NOTICE FORM for affected members to use and are contemplating the introduction of a Pre Lien Notice Service for your convenience. Let me know if this is of intrest to you.
We will have updates on the new law at both of the construction group meetings this month. Mr. Stamper is tentatively scheduled to attend Tulsa's meeting. Don't miss!
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Credit Grantors Must Get Okay to Pull Consumer Reports According to Federal Trade Commission
Two long standing questions surrounding the FCRA's "permissible purpose" section have finally been answered by the FTC. And the answers are "NO".
As a result of actions that had been taken by the FTC pertaining to interpretations of the legitimate business purpose exception included in the Fair Credit Reporting Act (FCRA), two specific questions were asked by NACM:
- Can a business credit grantor request a consumer report on a customer without getting specific permission from the consumer in writing?
- Can a business credit grantor request a consumer credit report on a person who signs a personal guaranty in connection with a business transaction without getting a specific written authorization?
The recent answer clarifies their position and it is not favorable to those who extend business or trade credit. The conclusions reached in the letter are disappointing. Although the letter is only an informal staff opinion and not "binding on the FTC", NACM members should consider the language of the letter as the position that will be taken by the FTC in the future. It also appears that the FTC's position is inflexible on this issue and that there is no room for debate or digression. Notwithstanding any possible subjective interpretation to the contrary, it is clear that a simple rule has been adopted:
A CONSUMER CREDIT REPORT CANNOT BE USED FOR ANY PURPOSE WITHOUT THE CONSUMERS WRITTEN CONSENT.
In light of the FTC's opinion, members should get written permission to run a consumer credit report. The appropriate language should be included as a separate form, or an addendum to accompany the credit application, as the party signing the application may not be the same party form whom you seek authorizaiton. It should be noted that a credit application that provides general authority to pull a consumer credit report on a corporation's officers may be insufficient. Rather, the credit grantor should obtain an authorization form from each party on whom a credit report is to be pulled.
NACM members should carefully review policies and procedures within their credit departments to make sure that in connection with the extension or continuation of credit to sole proprietorships or when seeking a personal guarantee in connection with a business transaction, that written permission be obtained from the consumer before acquiring the consumer credit report. Violation of the Act will lead to enforcement by the government against credit grantors which could include fines, penalties, and injunctions. More importantly, one or more consumers could join to start a class action lawsuit against credit grantors which would subject a creditor to substantial compensatory and punitive damages as well as attorney's fees.
The following is simple language that may be used by an NACM member in a credit appllication to comply with the requirements of the FCRA. The language must be in a separate paragraph following the signature at the bottom of a credit application or other agreement. It must be conspicuous and it must provide for the individual signature of the consumer whose credit report is to be aquired;
The undersigned individual who is either a principal of the credit applicant or a sole proprietorship of the credit history may be a factor in the evaluation of the credit history of the applicant, hereby consents to and authorizes the use of a consumer credit report on the undersigned by the above named business credit grantor, from time to time as maybe needed, in the credit evaluation process.
With respect to a personal guarantee, the following language may be included in the body of the guaranty so long as it is in a separate paragraph and it should be conspicuous by the use of either bold type or larger type:
The undersigned personal guarantor, recognizing that his or her individual credit history may be a necessary factor in the evaluation of this personal guarantee, hereby consents to and authorizes the use of a consumer credit report on the undersigned, by the above named business credit grantor, from time to time as may be needed, in the credit evaluation process.
The above is simple language which we believe may be generically used in every type of credit applicaiton/guarantee situatuion. However, each NACM member should review the company's credit applicaiton form and guarantee form to make sure that the other language in the document does not in any way contradict of vary the language suggested above.
A copy of the FTC's letter is posted on the NACM website in the "NACM News" section (found under Resources, then click Publications). Also, the September issue of Business Credit will feature a more detailed explantaion of the importance of this ruling. NACM's view is that this issue must be resolved by Congressional action. NACM will take immediate steps to try to have the next session of Congress deal with the issue promptly.
In them meantime, NACM MidAmerica will require that each member who requests an individual's consumer credit report provide evidence of the appropriate signature(s) with their request.
Please call me if you have any questions regarding this issue.
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Sample
Gentlemen:
Reely-Good Supply Company is furnishing material, including ready-mix concrete, gravel roof ballast, toliet partitions and paint, to Barely Able Builders, Inc., the general contractor, for use in the construction of your Stunning Vistas Assisted Living Center and Drive-In Mortuary Project, in Hochatown, Oklahoma.
Materials were furnished in June 2000 and charges of $7,308.16 were timely invoiced, but have not been paid.
Although we expect that the account will be paid without litigation, this notice of non-payment is given to comply with recent changes of the Oklahoma law. If payment is not received, a mecnanic's and materialman's lien could be filed and enforced against your project.
If you want any further information please let us know.
Sincerly,
REELY-GOODE SUPPLY COMPANY
Riley Reely, President
cc:Barely Able Builders
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