ucc 101: the basics of ucc searching and filing
TRANSCRIPT
UCC 101:The Basics of Searching and Filing
November 8, 2017
Meet Your Presenter
Lacey Bower
Financial Account Manager, CSC®
• Speaker on UCC searching and filing best practices
• Works with banks of all sizes, lenders, lessors, and manufacturing companies
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We are the business behind business
• Founded in 1899
• Global company headquartered in Wilmington, Delaware
• Over 60 years serving financial industry
• Over 6 million UCC transactions processed annually
• Over 8 million UCC transactions monitored
CSC is the largest U.S.–owned provider of:
• Lien Related Services
• Registered Agent
• Entity and Litigation Management
• Digital Brand Services
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Agenda
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• Questions to ask
• Searching
• Filing
• Monitoring
• Arm Yourself: CSC Resources
• CSCFinancialOnlineSM Demo
• Q&A
Questions to Ask
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Questions to Ask
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• Are you following searching and filing best practices?
• Are you filing against the right debtor names every time?
• Are you monitoring your portfolio for changes that may affect your lien position?
Searching
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Review: Searching Best Practices
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Registered Organizations
Individuals
Collateral administeredby decedent’s
personal representative
Use the Public Organic Record.
The starting point for every UCC search conducted on an individual is the driver’s license.
Search the name of the decedent.
Collateral held in a trustthat is not a registered
organization
Search on the name put forth in the trust documents. If there is no name, search on the settlor.
Review: Searching Best Practices
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Registered Organizations
Individuals
Collateral administeredby decedent’s
personal representative
Use the Public Organic Record.
The starting point for every UCC search conducted on an individual is the driver’s license.
Search the name of the decedent.
Collateral held in a trustthat is not a registered
organization
Search on the name put forth in the trust documents. If there is no name, search on the settlor.
ALWAYS include name variations for due diligence purposes.
State Search Logic: What You Must Know
• State’s search logic… in minute detail
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State Search Logic: What You Must Know
• State’s search logic… in minute detail
• How the search will perform in ALL circumstances
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State Search Logic: What You Must Know
• State’s search logic… in minute detail
• How the search will perform in ALL circumstances
• State’s historical indexing practices
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Filing
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Filing: Get the Debtor Name Right
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• Understand the impacts of the 2010 Amendments
• Follow best practices for filing against individuals and registered organizations
Individual Debtor Name
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Only If Safe Harbor
Debtor name must be exactly what appears on the individual’s driver’s license
Name can be what appears on drivers license, but other names may work as well
Sometimes called “Alternative A” Sometimes called “Alternative B”
Very Strict for filer More forgiving for filer
If license is expired or not issued by filing state, default to safe harbor
Individual Debtor Name
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Only If Safe Harbor
Debtor name must be exactly what appears on the individual’s driver’s license
Name can be what appears on driver’s license, but other names may work as well
Sometimes called “Alternative A” Sometimes called “Alternative B”
Very Strict for filer More forgiving for filer
If license is expired or not issued by filing state, default to safe harbor
Enactments and Legislative Status of the2010 Amendments to UCC Article 9
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RIMA
CTNJ
DEMDDC
AK
HI
AZNM
ND
FL
LA
WVCA
OR
WA
MT
ID
NVUT
WY
CO
SD
NE
KS
OK
TX
MN
IA
MO
AR
WI
IL
MI
IN OH
KY
TN
MS AL GA
SC
NC
VA
PA
NY
MENHVT
Enacted with Alternative A/ Only If
Enacted with Alternative B/ Safe Harbor
Legislation Failed or Not Introduced
PR
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Case Studies
Crossing Your t’s and Dotting Your i’s
In re: Markt, 2017 Bankr. LEXIS 472 (Bankr. S.D. Ind. Jan. 23, 2017).
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.
• 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”
• Mr. Nay filed bankruptcy and the secured party lost it’s claim on the equipment as the name on the filing was found to be seriously misleading.
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Crossing Your t’s and Dotting Your i’s
Fill in the Form Correctly!
In re: Voboril, 2017 Bankr. LEXIS 715 (Bankr. E.D. Wis. March 17, 2017).
A loan was made by First Bank Financial Centre to Stephen R. Voboril granting a security interest in a promissory note payable to the debtor.
• The UCC was filed, but the financing statement listed the debtor’s name in the “Organization’s Name” field of the record.
• The debtor filed for bankruptcy and the filing was determined to be misleading as the debtor’s name was “not properly provided.”
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The Savings Clause
In both of these cases, the Savings Clause was brought up.
• The Savings Clause §9-506(c) 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.
Searching on name variations will always be essential because of:
• Indexing Errors
• Filer Errors made effective by later changes in the search logic
• Not all filers subject to same rules
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Review: Corporate Debtor Name Best Practices
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Government charter entity(Farm Credit Bank)
Corps/LLCs
Business trusts(Massachusetts)
Charter document
Public organic record
Record filed with the state under state law
Entity created bylegislation (ex: Fannie Mae) Statute that created the entity
Name on UCC Must Match Articles of Incorporation
In re: Alvo Grain and Feed, Inc. (Bankr. Court, D. Nebraska, 2009)
• Articles of Incorporation: Alvo Grain and Feed, Inc.
• Debtor name on the UCC: Alvo Grain & Feed, Inc.
• The financing statement was found to be seriously misleading and the secured party lost a large claim.
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UCC Filings: Where to File
General Rule
• File in central filingoffice where debtor is located
• Exceptions: GA, LA
Collateral Exceptions
• Fixtures
• Timber to be cut
• Minerals to be extracted
Filing Location for Collateral Exceptions
• Office where a mortgage would be recorded on the affected real property
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File at parish level
File at county level
LA
GA
UCC Filings: Location Of Debtor
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Registered Organization Under State Law
Individual
Registered Organization Under Federal Law
Where organized or incorporated
Location of principal residence
Where designated by law or D.C.
Other Non-Registered Organization
Jurisdictions Without Filing Requirement
At place of business – chief executive office if more than one
District of Columbia
Monitoring
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Portfolio Monitoring
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• Changes in your debtor’s name or status can affect your lien position.
• It’s crucial to monitor your portfolio for changes and to prevent lapsed filings.
• There are simple, automated ways to receive alerts when things change.
Expiration Tracking
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• Email notifications of approaching dates
• Copies of acknowledgements
• Filing numbers auto-populated into UCC-3
• Flexible reporting
• The notification frequency of your choice
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Case Study
The most common post-perfection event that requires prompt secured party action is a change in the debtor’s name.
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”
• Debtor did not notify bank of name change
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”
• Debtor did not notify bank of name change
• Consequently, the bank did not file an amendment or new financing statement
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected
2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”
• Debtor did not notify bank of name change
• Consequently, the bank did not file an amendment or new financing statement
• On April 7, 2008, the Debtor filed for Chapter 7 bankruptcy
In Re: Lifestyle Home Furnishings, LLC
Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected 2010 Bankr. LEXIS 111
(D. Idaho, Jan. 14, 2010)
• Ownership of Factory Direct, LLC changed
• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”
• Debtor did not notify bank of name change
• Consequently, the bank did not file an amendment or new financing statement
• On April 7, 2008, the Debtor filed for Chapter 7 bankruptcy
• Trustee filed an adversary proceeding to avoid the bank’s security interest and moved for a partial summary judgment on the grounds that the bank became unperfected four months after the Debtor changed its name
Corporate Tracking
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Notifies you when a corporate debtor:
• Changes their corporate name
• Falls out of good standing
• Dissolves or merges
Debtor Tracking
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• Alerts you to new filings against your debtor, including new lending and terminations (even yours!)
• Send email alerts with links to the tracking results
• Allowing you to evaluate findings and request copies if needed
Bankruptcy Tracking
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Any delay in responding to bankruptcy filings can be costly.
Monitors court records and compares them to your…
• Debtor Name
• Street Address
• City
• State
• Zip Code
Arm Yourself: CSC Resources
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Secured Party Representation(SPRS)
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• UCC financing statements are public record
• Anyone can access your customer list
• Using a secured party representative prevents competitors from identifying filings
• SPRS centralizes inquiries
CSCTransactionWatch
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• CSC provides you with an archive of filing office closings and communications, pending and new legislation, UCC Article 9 updates.
• 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
• Whitepapers
• Filing guides
• On-demand webinars
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CSCFinancialOnlineSM
Demo
Questions?
Lacey Bower
Financial Account Manager, CSC®
(800) 927-9801 x.63363
Additional resources: cscglobal.com/resources
Thank you for attending!
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