The Basics of UCC Searching and Filing
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
Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo. To set up a live demo or to request more information, please complete the form to the right, or if you are currently not on CSC Global, there is a link to the website and the description of this video. Thank you.
James: Hello, everyone, and welcome to today's webinar, UCC 101: The Basics of UCC Searching and Filing. My name is James Weir and I will be your moderator.
Joining us today is Russ Lash. Russ 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 time, including improving uniform commercial code delivery times. And with that, let's welcome Russ.
Russ: Thanks, James, for the introduction. Welcome, everybody.
First, before we get into the content, I'd like to give some background. I have some facts about CSC. We are the business behind business. Founded in 1899, so we've been around for a long time, 120 years. Have a global company headquartered in Wilmington, Delaware. So we have a lot of offices both domestic and then also abroad.
A lot of time serving the financial industry, over 60 years. We process a lot of UCCs, over six million UCC transactions process annually and over eight million UCC transactions monitored.
In addition, CSC is the largest U.S.-owned provider of lien-related services, such as UCC, registered agent, entity and litigation management, and also digital brand services.
So today's agenda and some questions to ask yourself. We'll cover UCC searching, UCC filing, UCC monitoring, and then also show you how to arm yourself with our CSC resources. Then I will show you the CSC financial online demo, and then lastly, we'll touch on questions and answers.
So some questions to ask. Are you following searching and filing best practices? Are you filing against the right debtor names every time? Also, are you monitoring your portfolio for changes that may affect your lien position?
Searching. So searching best practices. Here are some starting points. On the left side of the screen, you see some teal boxes, and these are actually entity types. And then on the right, it'll show you the starting point, you know, where you go to search on these different organizations, also individuals.
So we start off at the top with individuals. The starting point for every UCC search conducted on an individual is the driver's license. That's where you start, with the information on the driver's license.
And then registered organizations, you want to use the public organic record. How you find the information in the public organic record, determine that. That's with registered organizations.
Collateral administered by decedent's personal representative, you want to search on the name of the decedent.
And then lastly, 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 isn't a name in the trust documents, you want to search on the settlor.
And then also, very important that you want to include name variations for due diligence purposes. This is important because sometimes there's . . . you have exact hits and then you have similar names and you have . . . you just want to make sure you have the full scope of name types for your due diligence search.
So the next is, you know, we'll talk about filing. So with filing, the thing about filing, UCC filings, is to get the debtor name right. You want to make sure you get the debtor name right because the debtor name is actually the most important piece of information on a UCC filing, so that needs to be right.
So you want to understand the impacts of the 2010 Amendments, and then you also want to follow the best practices against individuals and registered organizations.
So what we have here is we have the individual debtor name. We have the Only If, the "Only If" rule. So what this means here is debtor name must be exactly what appears on the individual's driver's license. This is also sometimes called the Alternative A. This is very strict for the filer. And then also, if the license is expired or not issued by a filing state, you want to default to the safe harbor.
And then now on the right side, we have the Safe Harbor, which is different than the Only If. And here, you'll see the differences in what contains that.
So, instead of the Only If, the name can be what appears on the driver's license, but also other names may work as well. Safe Harbor is also sometimes called the Alternative B. And then instead of being very strict for the filer, it's more forgiving for the filer.
And you'll see here a map of the United States. You see that the dark blue states are enacted with Alternative A, Only If. So a huge majority of them are Only If states. And then the ones in teal are enacted with the Alternative B, Safe Harbor. So that just kind of gives you a picture as far as, you know, which ones are enacted with A and which ones are inactive with the Alternative B.
Case studies. So here's a case study involving a crossing your Ts and dotting your Is. So as of July 1st, 2013, the sufficiency rules in most states require financing statements to provide the name of an individual debtor exactly as it appears on their active state driver's license.
So there's an example here. There's a borrower named Ronald Mark Nay. He financed two pieces of equipment. Now, his driver's license actually contained a typo and listed his name as Ronald . . . not Mark, but Ronald Markt Nay. It's spelled kind of weird, that middle name.
So Mr. Nay actually filed bankruptcy and the secured party lost its claim on the equipment as the name on the filing was found to be seriously misleading.
Another example here to make sure that you fill in the form correctly. It's very important to fill in the UCC filing form correctly, and here's an example of why it's important.
So the example is a loan was made by First Bank Financial Centre to Steven R. Voboril, granting a security interest in a promissory note payable to the debtor.
So the UCC was filed, but the finance statement listed the debtor's name in the organization's name instead of the individual name field of record. So that can make a difference. That can cause problems.
The debtor filed for bankruptcy and the filing was determined to be misleading, that the debtor's name was not properly provided. So that's something to be aware of when filling out the UCC filing form.
And then this also brings up the Savings Clause. So in both of these cases, the Savings Clause was brought up. So Savings Clause states that if a search in the public record using the filing office's standard search logic on the correct debtor name discloses a financing statement that fails to sufficiently provide the debtor's name, the filing is not seriously misleading. The Savings Clause did not apply to these situations.
So, you know, searching on name variations will always because essential because of indexing errors. What I mean by that is mistakes get made at the jurisdictional filing offices, filer errors made effective by later changes in the search logic, and of course, not all filers subject to the same rules.
So to review, corporate debtor name best practices. Here, this kind of shows you where to go about with these entities.
On the left side, again, entity types. You have your corporations/LLC, you want to use the public organic record.
Government charter entity, for example, like Farm Credit Bank, you want to use the name on the charter document.
Business trusts, like those found in Massachusetts, you want to use the record filed with the state under the state law.
And then, you know, we have what we've seen in recent times, entities created by legislation like Fannie Mae. There, you would use the name on the statute that created the entity.
So kind of going back to that poll question, you know, name on UCC must match the articles of incorporation. This is very, very important. And here's an example of why.
So this is actually a real . . . this is a real situation, Alvo Grain and Feed, 2009. So here, we have the articles of incorporation lists the name is Alvo Grain and Feed, Inc. with "and" being spelled out, but the debtor name on the UCC was Alvo Grain & Feed, Inc. So the financing statement was found to be seriously misleading and the secured party lost a large claim.
So something that's seemingly insignificant, you know, whether it's "and" or "&," that's actually very important when it comes to UCC.
UCC filings, where to file. So the general rule where to file a UCC is you want to file in the central filing office where the debtor's located. But there are two states that are exceptions to that, and one's Georgia and the other one's Louisiana.
So Georgia . . . you know, most of these UCC filings in other states are filed at the secretary of state level. It's a standard UCC filing. But Georgia, you want to file at the county level. Louisiana, because they have parishes instead of counties, you want to file at the parish level. So that's the exceptions, Georgia and Louisiana.
Now, other exceptions would be involving collateral. So fixtures, timber to be cut, minerals to be extracted, those are collateral exceptions. So what that also means is the filing location for these three above here, these collateral exceptions, you'd want to file in the office where a mortgage would be recorded on the affected real property.
So those are indexed differently than the standard UCC filings, so you'd want to file accordingly with that in those recording offices.
UCC filings, location of the debtor. So here are some other entity examples. We have individual. So you want to file at the location of the principal residence for an individual.
Registered organization under state law, you want to file wherever that organization organized or incorporated.
Registered organization under federal law, you're going to want to file wherever designated by law or Washington, D.C.
And then other non-registered organizations, at a place of business, and chief executive office if there's more than one. So the chief executive office.
And then also, you have the jurisdictions without the filing requirements. That would be filing in Washington, D.C.
So we'll move into the monitoring section now, with monitoring. We actually have four different types of monitoring, but this is kind of like the full scope portfolio monitoring.
So, you know, you filed your UCC, that's great. But see, the thing is, that doesn't stop right there. After you file your UCC, you're not done. When you file your UCC, then you also want to, you know, keep up to date as far as any changes that goes on. Maybe you file a UCC against a debtor and their name changes, but you're not notified about that. That can come up, and things like that. So that's where portfolio monitoring comes into play.
So changes in your debtor name or status can affect your lien position. That also means it's crucial to monitor your portfolio for changes to prevent lapsed filings. And then here, there are also simple, automated ways to receive alerts when things change.
So the first type of tracking or monitoring is the expiration tracking. And the expiration tracking is included with our filing service at no extra cost.
So expiration tracking, we'll email you notifications of approaching dates. You'll receive copies of the acknowledgements. Filing numbers auto-populate into UCC-3s. What that means is that, you know, if you want to file a continuation, you can do that actually very quickly. That information is saved, so all you have to do in the system is just click a button that says "create continuation," and then you can actually do that very quickly. You don't have to fill out another form to do that.
Flexible reporting, notification frequency of your choice. That means that in addition to actually being able to see your filings are about to expire in our system, you can actually have a report sent to you either daily, weekly, or monthly.
We like case studies here because it really shows examples of things that . . . you know, kind of examples of things that could go wrong, but also, ways that we can help prevent things from happening from going wrong.
So here, you have a case study of the most common post-perfection event that requires prompt secured party action is a change in the debtor's name. So like I said before, debtor's name is very, very important on the UCC filing. It's the most important piece of information on a UCC filing.
So we have an example here of Lifestyle Home Furnishings, LLC. The point of this is the failure to file a debtor name amendment leaves the lender partially unperfected.
So here, what happened was the ownership of Factory Direct, LLC, changed. Then the new owners changed the name from Factory Direct, LLC, to Lifestyle Home Furnishings, LLC.
So the debtor . . . and this happens. The debtor did not notify the bank of the name change. So then the secured party didn't know that. And this does happen. I mean, this does happen. Debtors will not notify you as the secured party of things that happen like this. That's why it's good to have us monitor that information for you.
So as a consequence, the bank did not file an amendment or a new financing statement. So then on April 7th, 2008, the debtor filed for Chapter 7 bankruptcy and then a trustee filed an adversary proceeding to avoid the bank's security interest, moved for a partial summary judgment on the grounds that the bank became unperfected four months after the debtor changed its name.
So that right there is a very good example of our corporate tracking. So just to kind of reiterate the corporate tracking, we'll notify you when a corporate debtor . . . you know, when they change their corporate name. If the debtor doesn't notify you, we'll notify you, because we'll keep up on that.
Falls out of good standing. If the corporate debtor falls out of good standing, we'll notify you of that with our alerts. Or if the corporate debtor dissolves or they merge, we'll also notify you about that.
In addition to the expiration tracking and the corporate tracking, we also offer debtor tracking.
So debtor tracking, just in a nutshell, is let's say you're a secured party and you file a UCC against the debtor, and then a couple of months later, that debtor also has from another secured party . . . another secured party will file another new UCC against that debtor. Then you'll be notified about that.
So you'll be notified . . . it could be you might want to know because maybe that debtor is taking on more debt, or things like that. So that's something to be aware of.
So we'll alert you any kind of new filings against your debtor, including new lending and terminations. So if the filing is terminated, you'll also be notified about that as well. So we'll send you email alerts with links to the tracking results, and then this will allow you to evaluate any findings and request copies if needed.
And then the fourth tracking monitoring option we have is bankruptcy tracking. So any delay in responding to a bankruptcy filing can be costly. What that means is we'll actually monitor court records and compare them to your debtor name, street address, city, state, and zip code. So we'll alert you if your debtor files for bankruptcy.
And then also, we have Arming Yourself: CSC Resources. We also have a really cool feature called Secured Party Representation Services, or what we also call SPRS here at CSC.
SPRS, what it does is CSC will act as a representative of you as the secured party. And the reason why we do this is because UCC financing statements are public record. So that means that anybody can access your customer list by just doing a simple search. Because it's public index, anybody can do a search on your name as a secured party and find that information out.
So by using a secured party representative, we'll actually prevent competitors from identifying filings because we'll actually be as representative of the secured party on the filing.
And then SPRS centralizes inquiries. So what that means is that we actually have a dedicated team here at CSC called the SPRS Team. And they will actually take these inquiries, these SPRS inquiries, and they will route them to the affected secured parties.
We actually take no liability in that. We don't reveal your name as a secured party because we are acting as a representative. So we just take the information and then we send that off to you as the secured party.
And then we also have a CSC blog. So the CSC blog will provide you with an archive of filing office closings, communications, pending and new legislation, also UCC Article 9 updates.
So here, there are a couple of examples of some changes, one being a price of a jurisdictional filing fee in Delaware, and the other one is for a change update in electronic filing in Mississippi.
And then down below, you have CSCglobal.com/resources. That includes whitepapers. So whitepapers are really useful articles. Some have been written by our associate general counsel Paul Hodnefield talking about UCC. Those are very good. Filing guides, and then also the on-demand webinars in which you can view those as well.