Which statement about a PMSI in consumer goods is true?

Which statement about a PMSI in consumer goods is true?

• A. Needs filing to perfect
• B. Has no priority over other interests
• C. Automatic perfection
• D. Only for equipment

Answer: (C)

A purchase-money security interest in consumer goods is automatically perfected at the moment it attaches. Because the financing is tied to the purchase of consumer goods, the secured party gets perfection without filing, right when the debtor takes possession of the goods. This automatic perfection helps protect the lender’s priority in the financed items without any additional steps. The idea that filing is needed to perfect is incorrect, and the notion that such a PMSI has no priority over other interests is also incorrect—typically, a properly perfected PMSI in the same consumer goods has priority over other security interests in those goods. Plus, it isn’t limited to equipment; it applies to consumer goods financed for purchase, like appliances and vehicles.

A purchase-money security interest in consumer goods is automatically perfected at the moment it attaches. Because the financing is tied to the purchase of consumer goods, the secured party gets perfection without filing, right when the debtor takes possession of the goods. This automatic perfection helps protect the lender’s priority in the financed items without any additional steps. The idea that filing is needed to perfect is incorrect, and the notion that such a PMSI has no priority over other interests is also incorrect—typically, a properly perfected PMSI in the same consumer goods has priority over other security interests in those goods. Plus, it isn’t limited to equipment; it applies to consumer goods financed for purchase, like appliances and vehicles.