Understanding the Limitations of State Direct UCC Online Searches & New Alternative Solution – FCS Greatest Hits #2

FCS Greatest Hits 2We continue our Greatest Hits blog post series this week with “Understanding the Limitations of State Direct UCC Online Searches & New Alternative Solution,” where we explain some of the drawbacks of using the state-provided UCC searching resources.


Understanding the Limitations of State Direct UCC Online Searches & New Alternative Solution

In addition to the broad-based name searching capabilities and reliable state-direct data we provide, our system features an expansive library of document images in PDF format, lifetime search history, real-time reporting of costs, and the ability to export search results into an Excel spreadsheet. The system also features a UCC filing and portfolio management portal that enables users to prepare, file and track their UCC transactions from one central, secured online location.

A growing number of state filing offices are offering UCC search databases at low to no cost via their websites. In an effort to keep due diligence costs low, many searchers are turning to state direct online databases to fulfill their UCC search requirements.

It’s easy to understand the appeal of these state direct databases – free searches: sounds great, right? When examined closely however, many of these state sites have limited utility due to some serious system limitations.

Here are a few questions to ask when evaluating if a particular state direct search site is the right choice for your firm:

What Lien Types are available on the Index?
Numerous states maintain Tax Lien records (Federal and/or State) in addition to UCC data. However, these lien types may or may not be available to the searching public via the state’s online database. Some states even have a separate online index that requires a second search to locate Tax Liens. To avoid any surprise liens, remember to research what lien types will be included in your results when using a state direct database.

Does the state direct database provide an index date?
Many states that offer an online UCC index do not publish their index date (aka through date) on the website to inform searchers of how current the online data is. Outdated lien information can impede a searcher’s ability to determine current filing status, accurate party names and priority of claims.

Are document images available online?
While a search report can deliver several pieces of critical information, it is usually necessary to view an image of the filed document to see what collateral a given Financing Statement covers. State direct databases that do not offer images online are only providing a piece of the puzzle.

What is the Search Logic?
Before using any state direct online search system, it is essential to have an in depth understanding of the type of search logic it employs. For example, does the state site allow for the entry of truncated search strings? Does the system report similar names? These features allow searchers to reveal name variations and uncover filings that may have been mis-indexed.

Keeping track of the ins and outs of the various state direct search sites can be a daunting task. Try using a proprietary search system to streamline your search process. Privately maintained and operated, these systems offer consistent search logic, easy to read results and a support staff to provide training and ongoing support.

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Commercial Finance Association’s 70th Annual Convention

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First Corporate Solutions will exhibit UCC searching, filing, and monitoring products and services, among other risk management services, at the Commercial Finance Association’s 70th Annual Convention. The convention takes place in Washington D.C., November 12-14.

FCS will host a prize drawing for a Bose SoundLink Color speaker at its brand new exhibition booth. FCS encourages all CFA attendees to stop by the booth, enter the contest by dropping a business card, and learning about the many solutions FCS has to offer financial institutions, asset-based lenders and more commercial lenders. FCS will exhibit its Account Monitoring, an industry-leading product for asset-based lenders.

The CFA convention is the premier event for commercial lenders nationwide, and will feature a keynote presentation by Dr. Ben Bernanke, former Chairman of the Board of the Federal Reserve.

For more information check out the event web page.

Broad Based UCC and Lien Name Searching – FCS Greatest Hits #1

FCS Greatest Hits 1We have published a lot of material on the topic of UCC searching over the years. Effective UCC searching can save you time and money, so this topic has been popular among our readers. Today, we are starting a six part blog series on the nature of broad based searching and search logic as it relates to UCC searching. Enjoy our first post, and please remember that these blog posts are for educational purposes only; always consult your legal counsel if you have questions.


Broad Based UCC and Lien Name Searching: What is it? Why is it Important?

There are many options available for those looking to perform a UCC and lien search. There are certified searches that come directly from the filing office, state direct database searches that are available on a state’s website, and proprietary search systems that private service companies build and maintain. A while back, First Corporate Solutions published a blog series on evaluating state search options where we discussed the benefits and drawbacks of each of these search sources.

In the post titled, “Evaluating State UCC Search Options Series # 5: Benefits of a Proprietary Database Search” we briefly note that one of the primary benefits of using a private search system is their use of broad based search logic. Herein we will discuss broad based search logic in more detail.

What is broad based name searching?

Search systems that use broad based name searching offer flexible search logic, as opposed to the strict, exact name search logic used to generate a certified search at the filing office. Broad based name searching refers to features such as wildcard characters and truncated search strings. These features are designed to produce a more inclusive search result.

Why is broad based name searching important?

One reason broad based name searching is so important is that it helps searchers locate filings under similar names. Locating filings under similar names and identifying name variations is critical, especially when it comes to tax liens. When tax liens are mixed in with UCC records at the filing office, they can be difficult to locate because tax liens are not held to the same strict debtor naming standards as UCC Financing Statements. A tax lien is often considered active and enforceable even if it is not filed under the taxpayer’s exact legal name as defined for voluntary lien holders in the Uniform Commercial Code. An exact name search cannot reveal tax liens filed under a name variation; only a broad based search solution can locate a tax lien under a name variation.

Another great benefit of using search systems that employ broad based search logic is that they help reduce search costs by allowing searchers to combine associated names of interest onto a single search report rather than paying separately for each. For example, imagine a search for a prospect named Robert McDonald. Using a search system’s wildcard feature, a searcher can draw results for McDonald, Mc Donald, MacDonald and Mac Donald as well as Robert, Rob, Bob, Bobby, Robbie and more all onto a single search report!

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New Jersey Added to Online UCC System

ANew Jersey state flags of Monday, November 3, we have added UCC data from New Jersey to our online UCC system. Active users may search New Jersey’s UCC database of more than 1.2 million filings, complemented by clear, downloadable document images.

Not familiar with our online UCC search system? Check out some more information here. And if you’re interested in learning more from one of our staff members, please click here to schedule a demo.

UCC system demo

 

New Jersey online UCC data is only available for legal and financial clients.

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Georgia UCC Data Added to FCS Online System

Georgia UCC dataWe are pleased to announce the release of Georgia data to our online UCC system. Beginning November 3, 2014, FCS online clients may search the state’s database of more than 3 million filings within our online UCC system.

The FCS online UCC system was designed with the high volume searcher in mind. For example, on the FCS system you can see full, detailed results with just one click, instead of having to open multiple screens. You will be able to combine your results all into just one clean search report. This saves a huge amount of time when doing regular UCC searches in Georgia.

Additionally, you may order all copies for your search at once—you no longer have to select each UCC-1, and then every amendment, to obtain your document images.

Georgia’s SOS website does not allow you to run wildcard searches, instead using a system called “stem searches” or “RA9 searches.” We have covered the importance of name variations in UCC searching extensively in previous blog posts.

The Georgia state portal does not contain filings prior to 1/1/1995. We have supplemented the state-direct data from Georgia with proprietary data, allowing users to search for UCC’s beyond that date. This means there are recent amendments belonging to older filings that will not have a parent on the state’s site, but will on the FCS online UCC system.

The Georgia SOS website also has a base monthly fee of $11.95 per month. The FCS system only charges you for the transactions you perform.

A constant benefit of using a third party online UCC system is the consistency of search logic and user interface, two areas that FCS takes great pride in providing for our customers.

If you have any questions, please contact your account manager or give us a call at 800.406.1577.

Not an online user? Set up a time to demo the FCS online UCC system today!

UCC system demo

 

First Corporate Solutions to Sponsor Bulk Sale Class, Exhibit at California Escrow Association’s 59th Annual Education Conference

California Escrow Association 59th Annual Educational Conference

FCS will host an exhibit at this year’s disco themed “Don’t Stop Believing” CEA conference, as well as sponsoring and presenting company news and information at the bulk sale session. The conference runs October 23-25 at the Hilton in Costa Mesa, with the bulk sale presentation taking place Saturday at 8:30AM.

FCS will host booth #15 and will offer information on the available products and services, conference swag and a prize drawing.

The conference will feature a golf tournament on Thursday, followed by two days full of speakers, industry sessions, legislative updates and prize drawings.

FCS has been a long time sponsor of the CEA and brings many services to the industry including UCC search packages, UCC filing, title search, and UCC recording and publishing.

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First Corporate Solutions Will Exhibit CADENCE Integrated Lien Monitoring at the CADENCE User Conference

It’s that time of year again: The CADENCE User Conference is just a few days away! The conference kicks off Tuesday, October 21 and runs through 10/23  at the Sheraton Birmingham, Alabama. Here is the conference flyer.

The conference, which has grown from a handful of CADENCE users into a substantial group of partners and vendors, will give Bayside Business Solutions partners a chance to discuss their various integrations with CADENCE, as well as give operators the opportunity to offer feedback on the user experience.

This marks the fifth year that we have exhibited at the CADENCE User Conference, which brings together Information Technology leaders and operators in the factoring industry.

First Corporate Solutions is the original partner to develop an integrated product with CADENCE. Together, we deliver a lien monitoring solution that can be managed within CADENCE that alerts users of post-filing lien events that could affect their perfected security interest.

The conference, which is only open to CADENCE users and partners, will feature eight breakout sessions, networking opportunities and tips to utilize the CADENCE platform better.

As a special gift to our readers, we’re giving away free copies of our eBook, The Ultimate Guide to Post Funding Due Diligence. Click below to get your copy today!

AM ebook

 

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Does the control agreement govern if it conflicts with any of the customer agreements between Pledgor and Broker?

Attorney Bennett Cohen returns this week to continue his examination on control agreements for pledged securities accounts. This is part six in our eight part series on the topic of control agreements. To start from the beginning, please see the first post, Examining Issues with Control Agreements for Pledged Securities Accounts.


Does the control agreement govern if it conflicts with any of the customer agreements between Pledgor and Broker?

Control Agreements photoSome control agreements fail to provide that if there is a conflict between the control agreement and the other customer agreements between Pledgor and Broker, that the control agreement will govern.  It is important for the Lender that the control agreement govern any such conflict, since the customer agreements will most likely conflict with, and be adverse to, the Lender’s rights. It should further be noted that a Charles Schwab’s control agreement form we recently reviewed provided exactly the opposite (i.e., that any conflict with the control agreement will be governed by Charles Schwab’s other customer agreements), and for this reason such provision was objectionable.

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Are the termination provisions in the control agreement acceptable to the Lender?

We’re talking control agreements this week with attorney Bennett Cohen. We’re midway through an eight part series on this topic, so if you need a refresher please check out our previous posts:

And now here’s Bennett Cohen with the latest piece on control agreements for pledged securities accounts.


Control Agreements photoA number of control agreements we reviewed have either vague, incomplete or unacceptable termination provisions. First, the Pledgor should have no ability to terminate the control agreement. Second, some control agreements provide that the Broker can terminate the agreement upon prior written notice to Lender and Pledgor, but fail to provide that upon termination, the pledged assets will be transferred either to the Lender or to another broker acceptable to Lender and who, along with Pledgor, have executed a new control agreement in favor of Lender, in form acceptable to Lender.  A poorly drafted termination provision can pose a significant risk to the Lender.

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We hoped you enjoyed this chapter of Bennett Cohen’s series on control agreements. By the way, have you checked out the list of UCC services we provide at First Corporate Solutions? With more than 25 years of experience in UCC and corporate due diligence, we have the right package for you. Click here to get started.

Get started today!

 

California Governor signs Assembly Bill 1858: Individual Debtor Name Safe Harbor

Debtor Name Safe HarborFor those managing personal property transactions in California, it is important to understand and be prepared for recent legislation that has been passed to provide a safe harbor for proper entry of individual debtor names when filing and searching for UCC Financing Statements.

Effective January 1, 2015, California will join the majority of states in adopting legislation which governs the proper name identification of individuals. This is commonly referred to as the ‘Alternative A’ or the ‘Only If’ approach.

Unlike business entities, where the name must be the same as what is reflected in the organic document (typically the Articles and Amendments), Assembly Bill 1858 provides rules for the valid individual debtor name, which states that the debtor’s name on the UCC will be sufficient ONLY IF the name provided is the exact name on the driver’s license or a California Identification Card.

New Individual Debtor Name Guidelines – Driver’s License

When qualifying a debtor, be sure to follow these tips to ensure proper entry of individual debtor names on your UCC Financing Statement and/or search requests.

  1. Insert the exact name on the Driver’s License or California ID card of your debtor onto the UCC.
  2. Ask the party(ies) if this is the most current ID provided.
  3. Ask if the name may have changed since the ID was issued.
  4. Have the party(ies) sign a declaration that there have been no changes.
  5. If there have been changes, include both the name on the ID and the current name used on your UCC filings and search request.

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Does the control agreement go too far in limiting the potential liability of the Broker?

We’re back this week with more in our series from attorney Bennett Cohen on control agreements for pledged securities accounts. This is the fourth post in our series, so if you need a refresher please visit his introductory post, Examining Issues with Control Agreements for Pledged Securities Accounts.


We’ve reviewed quite a number of control agreements which provide that the Broker shall have no liability to the Lender except for the Broker’s gross negligence or willful misconduct. This limit of liability is too narrowly drawn. Three (3) additional exceptions that should be carved-out of this standard non-recourse language are as follows:

(a) if the Broker permits any withdrawals of any assets from the Securities Account at any time without the prior written consent of Lender (except to the extent, if any, that the control agreement permits the Pledgor to receive cash interest or regular cash dividends prior to Lender’s issuance of a “notice of exclusive control” and such withdrawals occur prior to such notice),

(b) if trading by Pledgor is allowed in the Securities Account, then if Pledgor is allowed to trade in the account after the Broker has received from Lender a “notice of exclusive control”, or

(c) if the Broker permits the Pledgor to trade in the Securities Account and the control agreement provides that the Pledgor has no authority to trade in the Securities Account at any time.

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About the Author

Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C.  Bennett concentrates his practice in commercial finance. He regularly represents banks, commercial finance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial & industrial loans, commercial real estate mortgage and construction loans, equipment lease loans and factoring transactions. He served for fifteen years as general counsel to the Midwest Association of Secured Lenders, a trade association of over eighty banks and finance companies located in Chicago and outlying areas. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. He was a member of the ABA Joint Task Force on Deposit Account Control Agreements, the ABA Model Intercreditor Task Force, and the ABA Joint Task Force on Filing Operations and Search Logic.

 

Has the Broker subordinated its statutory first priority security interest in the Securities Account to the Lender’s security interest in the Securities Account?

We’re continuing our examination of control agreements for pledged securities accounts with guest blogger Bennett Cohen of the law firm Cohen, Salk & Huvard, P.C. See the introductory post here and the follow-up post, Is there adequate “control” language in the control agreement?


Has the Broker subordinated its statutory first priority security interest in the Securities Account to the Lender’s security interest in the Securities Account?

Some control agreements fail to provide that the Broker subordinates its security interest in the Securities Account to the Lender’s security interest in the Securities Account. This subordination is absolutely essential for a Lender because a Broker’s security interest in the Securities Account automatically primes the Lender’s security interest in the Securities Account under Code Section 9-328(3).[1]  Most subordination provisions will necessarily carve-out for the Broker the right to charge the Securities Account for (a) payment for assets purchased in the Securities Account, and (b) normal commissions and service fees due the Broker for the Securities Account.

It should be noted that a recent TD Ameritrade control agreement form we reviewed did not contain a subordination provision.  If the Securities Account is not a margin account and the Broker does not otherwise extend credit to the Pledgor (or provide Pledgor with credit card or check-writing privileges), the absence of a subordination provision may not be fatal.  However, the best practice is to require this standard subordination provision in the control agreement.

[1] All customer agreements we’ve reviewed between the Pledgor and the Broker contain the Pledgor’s grant of a security interest in the Securities Account to the Broker which automatically gives the Broker a first priority security interest in the Securities Account.


Next week we’ll continue our guest blog series with attorney Bennett Cohen on control agreements for pledged securities accounts. Looking for more educational resources? Just tell us what information you’re looking for by emailing communications@ficoso.com and we’ll send it out.

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Do You Need Plain or Certified Copies of Corporate Documents?

When the time comes to order corporate documents (such as articles of organization, amendments/mergers, annual filings) from the state or county filing office, being prepared can save you money and effort. Once you know the reason you need the documents, you can choose either plain or certified copies. Knowing which will satisfy your business needs can help your ordering process.

In this guide you’ll learn about how a filing offices creates these documents, and also some common business needs for both plain and certified copies of corporate documents. Download this free guide now!

 

Corporate Documents

 

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Free eBook on Lien-Related Post Funding Due Diligence

As a lender, you need to know immediately if your customer is experiencing financial distress that could result in bankruptcy or debtor default. In this FREE guide you will find:

  • Top 5 Mistakes to Avoid on UCC Financing Statements
  • What a Search to Reflect can do for you
  • When to File Continuation Statements
  • Lien Monitoring Programs
  • Importance of Monitoring to Reveal Name Variations

Download this free guide today!

AM ebook

 

The Basics of Collateral Descriptions on UCC Financing Statements

Figuring out how to describe the collateral on a UCC Financing Statement to best protect your interests can be confusing. In fact, one of the most common questions FCS hears from customers and prospects is “What collateral language should I use on my UCC filing to make sure we’re protected?”

Bradley B. Clark answers that question and more in this webinar presentation.

Webinar

 

Why Search for Tax Liens and Judgment Liens?

Judgment Lien and Tax LienThe short answer is that searching Tax Liens and Judgment Liens while conducting your due diligence might save you money and hassle, but let’s back up and explain the reasoning.

The first thing to understand is that both Tax Liens and Judgment Liens have priority relative to other types of liens, such as a UCC, based on the date of its filing, and this affects your ability to collect. For example, if your debtor has an outstanding Tax or Judgment Lien filed against him, those liens will most likely prime a subsequent perfected UCC in the event of a default.

In addition to affecting priority, it’s important to note that both Judgment and Tax Liens are involuntary liens, which means the debtor has not entered into the deal willingly. Neither of these liens requires a signature from the debtor, and there is no underlying agreement to which both parties agree. A debtor should not be relied upon to disclose these liens, and it’s even possible that they are not aware the lien exists. This is why a thorough due diligence search will reveal all types of liens.

Depending on the jurisdiction, Judgment Liens or Tax Liens can be filed in either the state or the county filing office. When conducting due diligence searches, make sure that you use a service provider that’s capable of finding name variations using broad-based searching techniques.

If you’re interested in learning more about this topic, download our reference guide What Liens to Search For today.

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