First Federal loaned Madeline $20,000 to purchase a new van. The van was for Madeline’s personal and family use. First Federal’s security in

First Federal loaned Madeline $20,000 to purchase a new van. The van was for Madeline’s personal and family use. First Federal’s security interest is a purchase money security interest which perfects only upon filing a financing statement. True or false?

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  1. Answer: False

    Explanation:

    First Federal’s security interest is indeed a Purchase Money Security Interest (PMSI) but it doesn’t only perfect upon filing a financing statement.

    The PMSI can also be perfected by POSSESSION specifically of TANGIBLE CHATTEL PAPER which is simply a document that states that the holder is owed money and has a security interest in the goods associated with the debt.

    In this case that Tangible Chattel Paper can be the car’s title which can indicate the car loan as a security Interest.

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