UCC 101: The Basics of Searching and Filing
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Uniform Commercial Code (UCC) filing, searching and monitoring can be complicated between debtor name variation, search logic differences, and various filing procedures. But filing, searching and monitoring properly can save your firm from many problems.
Getting and staying organized, paying attention to detail and keeping close track of the changes that may impact your filing position can be easy with the help of a few best practices.
Join Russ Lash of CSC® for a free webinar to learn:
- Debtor name ins-and-outs
- Common UCC pitfalls
- Hints for better UCC-1 and UCC-3 forms
- Easier options for successful debtor tracking
Annie: Hello, everyone. And welcome to today's webinar, UCC 101: The Basics of UCC Searching and Filing. My name is Annie Bruxelles. And I will be your moderator. Joining us today is Russ Lash. Rush Lash is a financial account manager at CSC. He is responsible for building relationships with customers. And since joining CSC in 2010, Russ has improved the customer experience by shortening workflow turnaround times and decreasing processing times, including improving Uniform Commercial Code delivery times. And with that, let's welcome Russ.
Russ: Thanks, Annie. Welcome, everybody, to UCC 101: The Basics of Searching and Filing. Here's a little bit of company information that we have. We've been around for a long time, CSC. We've been around for almost 120 years. We're a global company headquartered in Wilmington, Delaware. We've spent over 60 years serving the financial industry. Over six million UCC transactions processed annually, and over eight million UCC transactions monitored. CSC is also the largest U.S.-owned provider of lien-related services, registered agent services, entity and litigation management services, and also digital brand services.
The agenda for today is will be some questions that you might think to yourself to ask. We're going to talk about searching. We're going to talk about filing, also monitoring, how that works, about CSCFinancialOnline, arming yourself, CSC resources, some tools that we have that can help protect your secured interests, and then also get into the CSCFinancialOnline demo. There I could show you how that works, how you can search and file and then also questions and answers.
Questions to ask. Here's some questions that you might ask yourself. Are you searching and following best practices? Are you filing against the right debtor names every time? Also, are you monitoring your portfolio for any changes that may affect your lien position?
Searching. Review: Searching Best Practices. So with individuals, the starting point for every UCC search conducted on an individual is the driver's license, as far as the search goes. If you're searching on a registered organization, you want to use the Public Organic Record. Collateral administered by a decedent's personal representative, you want to search the name of the decedent. Collateral held in a trust that is not a registered organization, you want to search on the name put forth in the trust documents. If there is no name, you want to search on the settler.
So as you can see here on the blue at the bottom, you always include name variations for due diligence purposes. When you run a due diligence search at CSCFinancialOnline, we have the ability to give you the capability to cast a wide net. So you're going to search on names that reflect exactly the name you're looking for, plus also name variations, any typos that could be out there that are recorded. And this is also very important for due diligence and make sure that you get all the information that you need.
State Search Logic: What You Must Know. State search logic in a minute detail. Public search will perform in all circumstances and also the state's historical indexing practices.
Next, we're going to talk about filing. Filing: Get the Debtor Name Right. So in order to understand filing procedures, you want to understand the impacts of the 2010 amendments. Also, you want to follow the best practices for filing against individuals and registered organizations. So we have here "Only If" status when it comes to individual name, debtor name, you have the "Only If" status. Now, the "Only If" status means the debtor name must be exactly what appears on the individual driver's license. This is also sometimes called Alternative A. It's very strict for the filer.
And also, if the license is expired or not issued by a filing state, you want to default to safe harbor. Safe Harbor. This is a little bit different than "Only If." Name can be what appears on the driver's license, but other names may work as well. So different from Alternative A, this can also sometimes be called Alternative B. And it's also more forgiving for the filer, whereas "Only If" is very strict for the filer.
Here we see a map of the U.S. and Puerto Rico showing which states are inactive with Alternative A, "Only If" status. You see a large portion of the country and also Puerto Rico are showing dark blue. That means that they are Alternative A, "Only If." Just a few states, Alaska, Wyoming, Colorado, and then some on the Eastern Seaboard are inactive with the Alternative B safe harbor.
Now, here's an example of some case studies. Crossing your T's and dotting your I's. So as of July 1, 2013, the sufficiency rules in most states require a financing statement to provide the name of an individual debtor exactly as it appears on their active state driver's license. So here's an example. A borrower named Ronald Mark Nay financed two pieces of equipment. His driver's license actually contained a typo and listed his name as Ronald Markt Nay. So then Mr. Nay filed bankruptcy. And a secured party lost its claim on the equipment, as the name on the filing was found to be seriously misleading.
Also, crossing your T's and dotting your I's. So here's another example. A loan was made by First Bank Financial Center to Stephen R. Voboril granting a security interest in a promissory note payable to the debtor. So the UCC was filed, but the financing statement listed the debtor's name and the organization's name field of the record. The debtor then filed for bankruptcy. And the filing was determined to be misleading, as the debtor's name was not properly provided.
What we have here is the savings clause. In both of these cases, the savings clause was brought up. So the savings clause states that if a service in the public record, using the filing office's standard search logic, on the correct debtor name discloses financing statement that fails to sufficiently provide the debtor's name, the filing is not seriously misleading. So the savings clause did not apply to these situations. So searching on name variations will always be essential because of indexing errors. There could be filer errors made effective by later changes in the search logic. And also, not all filers are subject to the same rules.
So Review: Corporate Debtor Name Best Practices. So with corporations, LLCs, you want to use the public organic record. For a government charter entity, you want to use the charter document. Business trusts, you want to use the record filed with the states under state law. And then the entity created by legislation, for example, Fannie Mae, statute that created the entity.
Name on UCC must match Articles of Incorporation. So we have an example here. It's Alvo Grain and Feed, Inc. So the Articles of Incorporation, Alvo Grain and Feed, Inc. was on the Articles of Incorporation. On the debtor name on the UCC, it was Alvo Grain & Feed, Inc. So the financing statement was found to be seriously misleading. And the secured party lost a large claim. So, looking at this just the difference between the word and, and the ampersand and, affected the claim here, that the secured party lost their claim. So that was a big problem.
UCC Filings: Where to File. The general rule is to file in a central filing office where the debtor is located. Now, there are a couple exceptions here. Georgia, you want to file at the county level. Louisiana, you want to file at the parish level. And the collateral exceptions are fixtures, timber to be cut, and minerals to be extracted. So the filing location for collateral exceptions, the office where a mortgage would be recorded on the affected real property.
UCC filings: Location of Debtor. So if you want to file against an individual, you want to find the location of principal residence. If you want to file against a registered organization under the state law, you want to file wherever that organization organized or incorporated. Registered organization under Federal law, you want to file where designated by law or District Columbia. Other nonregistered organization, you want to file at the place of business, a chief executive office, if more than one. And then lastly jurisdictions without filing requirements, you want to file with the District of Columbia.
We're going to talk about monitoring and how that can benefit you with your filings and your portfolio management here. Portfolio monitoring. Changes in your debtor's name or status can affect your lien position. It's also crucial to monitor your portfolio for changes and to prevent lapsed filings. And there are simple automated ways to receive alerts when things change. So one of the cool things that we have is expiration tracking. And that's actually included with our filing service fee. When we file on your behalf of filing, we will monitor that filing with expiration to let you know when it's going to expires and then when it's time to continue.
So email notifications of approaching dates, you'll receive copies of acknowledgements. Filing numbers are auto-populated in the UCC-3. That's very vague. That will prevent rejections to your filings. Flexible reporting. And then notification of frequency of your choice. So what that means is that you can opt to have either a daily, weekly, monthly reports that can be sent to you letting you know, you know, heads up about any kind of your filings that are going to expire.
Case study. The most common post-perfection events that requires prompt secured party action is a change in the debtor name. Lifestyle Home Furnishings. Failure to file debtor name amendments leaves lender partially unperfected. So ownership of Factory Direct, LLC changed. The new owners changed the name from Factory Direct, LLC to Lifestyle Home Furnishings, LLC. So the debtor did not notify the bank of the name change. As a consequence, the bank did not file an amendment or a new financing statement. So then, unfortunately, on April 7, 2008, the debtor filed for Chapter 7 bankruptcy. So then the trustee filed an adversary proceeding to avoid the bank security interest and moved for a partial summary judgment on the grounds that the bank became unperfected four months after debtor changed its name.
So here, we have some tools. We have some tracking tools, corporate debtor and bankruptcy tracking that can help you maintain lien perfection and that also safeguard towards any kind of factions that happens with the debtor names and then protect your secured interest. So first up we have corporate tracking. Corporate tracking will notify you when a corporate debtor changes their corporate name, falls out of good standing, or dissolves or merges.
Debtor tracking. Alerts you to new filings against your debtor, even new lending and terminations, even yours. We'll send mail alerts with links to the tracking results. So this just allows you to evaluate findings and request copies, if needed.
Bankruptcy tracking. Any delay in responding to bankruptcy filings can be costly. So with bankruptcy tracking, we'll monitor court records and compare them to your debtor name, street address, city, state, and zip code.
Arming yourself, CSC resources. Another tool we have here at CSC is called secured party representation. It's also called SPRS. Here, your UCC filing statements are public record. Anyone can access your customer list. And also, using a secured party representative prevents competitors from identifying filings. SPRS centralizes inquiries.
CSCBlog. CSC provides you with an archive of filing office closings and communications, pending and new legislation, UCC Article 9 updates. So, for example, July 1, 2017, Mississippi now requires electronic filing for all UCC filings, including agricultural liens. August 1, 2017, the state of Delaware increased its filing fee from $30 to $50. CSCglobal.com resources. Here, you can find whitepapers, filing guides, and on-demand webinars.
Annie: Okay. Great. Thank you, Russ. Folks, that's all the time we have for today. Thank you to everyone who joined us. We hope to see you next time.
Russ: Thanks, everyone.