16a-3-302. (1) In addition to contracting for a security interest pursuant to the provisions on security in sales or leases, a seller in a consumer credit sale may secure the debt arising from the sale by contracting for a security interest in other property if as a result of a prior sale the seller has an existing security interest in the other property. The seller may also contract for a security interest in the property sold in the subsequent sale as security for the previous debt.
(2) If the seller contracts for a security interest in other property pursuant to this section, the finance charge thereafter on the aggregate unpaid balances so secured may not exceed that permitted if the balances so secured were consolidated pursuant to the provisions on consolidation involving a refinancing. The seller shall have a reasonable time after so contracting to make any adjustments required by this section. "Seller" in this section does not include an assignee not related to the original seller.
History: L. 1973, ch. 85, § 48; L. 2024, ch. 6, § 70; January 1, 2025.
KANSAS COMMENT, 2010
1. A seller who sells goods on credit to a buyer in more than one sale may secure the debts arising from each sale by a cross-collateral security interest in the other goods sold so long as the seller has an existing security interest in the other goods. K.S.A. 16a-3-303 specifies when a seller loses a security interest in goods in a cross-collateral situation.
2. Cross-collateral clauses are most commonly used by sellers of furniture and appliances, and their use of these clauses may be affected by the F.T.C. Credit Practices Rule, 16 C.F.R. Part 444, which prohibits the taking of non-possessory, non-purchase money security interests in most household goods. See the Kansas comment to K.S.A. 16a-3-301. Under the F.T.C. Rule, cross-collateral clauses that attempt to make household goods serve as security for all current and future loans are invalid. However, the F.T.C. Rule does not prohibit retention of a security interest in household goods upon refinancing or consolidation of an original purchase money transaction. Thus, cross-collateral clauses are permitted to the extent that they allow a creditor to retain a security interest in refinancing or consolidating a prior transaction in which the security interest arose. As a result, household goods which secure the prior loan may continue to secure a refinanced or consolidated loan, but clauses that go beyond refinancing or consolidation of purchase money transactions violate the F.T.C. Rule if they include household goods.
3. In cases not involving household goods, subsection (1) allows cross-collateral to be taken either for separate debts or for consolidated debts, but subsection (2) limits the rate of the finance charge that a seller may charge in the separate debt case to that chargeable had the debts been consolidated pursuant to K.S.A. 16a-2-505(1).
Law Review and Bar Journal References:
"The New Kansas Consumer Legislation," Barkley Clark, 42 J.B.A.K. 147, 197 (1973).
"Survey of Kansas Law: Consumer Law," John C. Maloney, 27 K.L.R. 197, 201 (1979).
"Commercial Transactions Under the New Bankruptcy Act," Paul B. Rasor, 48 J.B.A.K. 199, 205, 211 (1979).
"Farmers and the Law: Exemptions and Exceptions," J. W. Looney, 50 J.B.A.K. 7, 16 (1981).
"A Primer on Purchase Money Security Interests Under Revised Article 9 of the Uniform Commercial Code," Keith G. Meyer, 50 K.L.R. 143 (2001).
CASE ANNOTATIONS
1. In lien avoidance case, a lien is purchase money until purchase price paid out applying first-in, first-out payment method. In Re Gibson, 16 B.R. 257, 258, 268 (1981).
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