What is automatic perfection of a security interest?

In certain types of transactions, a secured party’s interest in collateral is automatically perfected without filing a financing statement and without taking possession or control of the collateral. This is known as automatic perfection. Depending upon the nature of the collateral, automatic perfection may be permanent or only last for a temporary period. Temporary automatic perfect allows a party a window of time to undertake procedures to permanently perfect the security interest. Below are the most common types of automatically perfected security interest:

• Purchase Money Security Interests in Consumer Goods,
• Purchase Money Security Interests in Non-Consumer Goods,
• Perfection in Proceeds from the Sale of Goods, and
• Assignments of Accounts Receivable and Contract Rights.

Each of these types of security interests and the automatic perfection attributes are discussed in a separate lecture.