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Tips for Avoiding UCC Rejections

First Corporate Solutions Team — Tue, 30 Aug 2011 17:26:40 +0000

A creditor must file their UCC1 Financing Statement quickly and correctly In order to perfect their security interest. Rejected UCC filings can prove costly for lenders as they open the door for secondary parties to claim a priority position. In this blog post, we offer a few tips to avoid rejection of your UCC documents.

In truth, there are not many errors you can make that will cause a filing officer to reject a UCC document. For the filing officer to accept a UCC for filing, the document must meet a set of minimum requirements. These requirements vary a little from state to state, but in many cases, all a filing has to do is include a debtor name and address, a secured party name and address and a collateral statement. If a UCC document meets the minimum requirements and the correct filing fee accompanies the document, the Uniform Commercial Code directs the filing officer to accept the document into the public record.

Here are a few simple steps you can take to reduce your number of rejected UCC filings:

Forward the right payment for your UCC filing. When in doubt, you can always check the state’s website for information on filing fees. Remember, you may encounter additional charges for multiple debtors, attachment pages or the use of a non-standard form.
Make sure the document is legible. Keep in mind that the definition of a legible document is evolving as technology advances. Presently, most states will reject a document that, while legible in hard copy form, will not scan well into their electronic database.
Complete all of the necessary fields on the form for your specific type of transaction.
For UCC3 filings, make sure you include the correct UCC1 filing number on the document. The filing office will likely reject a UCC3 that lists a number that does not match any of their active records.
Keep a close watch on your UCC lapse dates and submit your continuation statements within the 6-month window; continuations that are submitted too early will be rejected by the filing office.

The First Corporate Solutions online filing system, File ‘n Track, uses form-filler technology to guide the UCC filing process and reduce filing mistakes. Contact us today at 800.406.1577 or info@ficoso.com for a free system demo.

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Top 5 Filing Mistakes on UCC1 Financing Statements

First Corporate Solutions Team — Thu, 19 Aug 2010 21:02:36 +0000

In a previous blog post, we offered a short list of errors to watch for when filing UCC1 Financing Statements. Since publication, several readers have asked for additional details on how to avoid committing UCC filing mistakes. In response to their requests, we have put together the following expanded list of the top five mistakes that occur on UCC1 filings.

1. Failing to file under the exact legal name

A UCC filing must properly identify the debtor to effectively perfect a security interest. To satisfy this requirement, it is critical to use the debtor’s exact legal name on your UCC1 Financing Statement.

For a business name that means the name is it appears on their formal organizing paperwork such as articles of incorporation/organization or partnership agreement.

Determining the exact legal name for an individual can be difficult. In most cases it will be the name on a person’s driver license or state-issued identification card, but it is a good to check the specific state UCC filing rules before filing on individual names to guarantee compliance.

2. Including “dba” notation as part of a debtor name

Examples: Debtor: John Smith dba ABC Trucking or ABC Trucking, Inc. dba Truck World

Secured parties will sometimes include a “dba” name as shown above in an attempt to more clearly identify their debtor. By structuring their debtor names in this way; secured parties are actually failing to file under the exact legal name. A better choice would be to add the tradename as an additional debtor, omitting the “dba” tag from the name.

3. Filing document in the incorrect filing office

Revised Article 9 established that UCCs are filed based on the location of debtor NOT the location of the collateral. Here is an overview:

Registered Business: file in their home/domicile state
Unregistered Business: file in the state where they have their chief executive officer
Individuals: file in their state of residence

4. Missing attachment pages

If your Financing Statement requires attachment pages to list out specific collateral, make sure to carefully review all pages of the attachment before submitting the document for filing. Missing attachment pages can cause a UCC to inadequately describe the collateral, which could prove very dangerous in the event of a competing claim.

5. Incorrect filing fee

One of the primary duties of the filing officer is to ensure that proper payment is remitted. A document that is presented for filing with the incorrect filing fee will be rejected.

To guard against damaging filing mistakes, consider working with a service provider that performs a thorough quality review of your documents prior to submission. A well-trained eye can catch many of these before it’s too late!

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Secured Party is Responsible for Accuracy and Completeness of a UCC Financing Statement

First Corporate Solutions Team — Thu, 05 Aug 2010 23:41:47 +0000

Financing Statements are filed as a means to protect a creditor’s investment and give them a mechanism to collect should the debtor default. However, a filed UCC Financing Statement is not necessarily enough. To provide priority protection for the creditor, a UCC1 must be properly filed in accordance with the Uniform Commercial Code (The Code) and the specific rules of the jurisdiction’s filing office. Since only a properly filed UCC will perfect a security interest, it can raise the question of responsibility. Essentially, who is responsible for making sure a UCC document is properly filed?

According to The Code, the filing officer’s duties are to be strictly administrative in nature. A document that is presented for filing must only satisfy a set of minimum requirements to be acceptable for filing. In many states, a filing need only list a debtor name and address, a secured party name and address and include a collateral statement.

Many UCC filers operate under the misapprehension that the filing officer will “catch” their mistakes reject a document that threatens to leave them unperfected. In truth, if the minimum statutory requirements are met and the correct filing fee accompanies the document, the filing officer is directed to file it into the public record.

When filing UCCs, please always keep in mind that it is not up to the filing officer to verify any of the information on the document; the burden for getting the information right falls to the Secured Party.

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I’ve Got My UCC Search – Now What? Tips for “Reading” Your UCC Search Report

First Corporate Solutions Team — Mon, 02 Aug 2010 23:12:27 +0000

A UCC report will look different and may contain slightly different information depending on where the search was performed and by whom. As a result, it can be challenging to make sense of a UCC search report if you are unfamiliar with how to “read” it. Knowing that an accurate interpretation of the UCC data that is reported to you is critical to the success of your business, we offer the following tips for how to read a UCC search report.

Review Search Parameters

Your UCC search report will indicate the parameters that were used to perform the search. Review these parameters closely to make sure your instructions were followed and the report was produced according to your specifications. Here you should be checking that the proper name was searched free of spelling errors, the search was performed in the correct filing office and that all requested lien types were included in the search effort.

Note the Index Date (aka through date)

When a UCC document is accepted by the filing office and assigned a date and filing number, the pertinent document information must then be entered into the state’s indexing system. This process takes some time, so the UCC index is always at least a day or so behind today’s date.

A UCC search should list an index date to inform you of how current the lien information is. If your search report does not reference an index date, contact your searcher immediately. Outdated lien information can impede your ability to determine current filing status, accurate party names and priority of claims.

Examine the Results

The results section of a search report details a chronological listing of the UCC and lien filings that were located based on your search criteria. The scope of information reported here may vary based on the data source, but most will include, at minimum, a date of filing, filing number, debtor name and secured party name. A more comprehensive search report will also disclose party addresses, type of collateral and filing lapse date. Any information not abstracted onto the search report can be learned by reviewing document images.

You will need to examine the search results carefully to determine if an existing claim would jeopardize your ability to collect on debts, taking into account the filing date, collateral and status of any items listed on your search report.

When hiring a private service company to perform UCC research on your behalf, consider asking for a sample search report up front to familiarize yourself with their reporting style and to confirm that the information you need will be included on your results report.

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State-specific UCC rules: Examples of the (not so) Uniform Commercial Code

First Corporate Solutions Team — Fri, 28 May 2010 18:24:32 +0000

The Uniform Commercial Code (UCC) is a bit of a misnomer given that its interpretation and application varies widely from state to state. With this, our final “UCC Month” blog post, I want to draw attention to a few state-specific UCC rules.

Filing and Recordation Taxes (AL, FL, MD, TN)

Alabama, Florida, Maryland and Tennessee have special rules that may require the payment of taxes at the time of filing UCC documents. Any taxes due are in addition to the appropriate filing fee for that document.

Font Requirement (IL)

In the state of Illinois, the Secretary of State’s office requires UCC filers to type all debtor and secured party names in all capital letters in 12-point font using Times New Roman style type.

Debtor Notification (IN)

Indiana law requires a debtor notification process. For UCC1s and UCC3s filed in Indiana, the debtor must receive a copy of the filed UCC record within 30 days of filing.

Collateral Limitations (UT, WY)

Utah and Wyoming have enacted character limitations for collateral descriptions. The state of Utah accepts no attachment pages and allows for only 250 characters per page. Wyoming requires UCC filer to submit collateral descriptions in excess of 300 characters on a disk.

Note that this is not intended to be a comprehensive list of all state-specific UCC filing rules. Rather, the purpose of this post is to get you thinking about the importance of researching state requirements prior to submitting UCC documents for filing. To guard against rejected filings and potential loss of priority, consider working with a service company that is well versed in nationwide UCC rules and requirements.

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FAQ #5: When do I file my UCC3 Continuation Statement?

First Corporate Solutions Team — Fri, 30 Apr 2010 18:52:38 +0000

This post represents the final installment of our frequently asked questions blog series and it’s a big one. This week we will answer the question we get asked more than any other, which is, “When do I file my UCC3 Continuation Statement?”

It is critical for a secured party to file timely continuations, as a lapsed filing ceases to be effective and opens the door for a subsequent filer to move into a priority position. The Uniform Commercial Code sets forth strict guidelines on when Continuations can be filed, but the rules can be confusing.

Here are a few tips to help you determine when to file:

1. Keep an eye on the Lapse Date
A UCC1 financing statement is effective for a period of five years from its date of filing. Every Financing Statement has a filing date and a corresponding lapse date. In order to extend the term, a secured party must file a continuation statement prior to the UCC1’s lapse date.

2. Six Month Window
The Uniform Commercial Code establishes that a Continuation Statement is acceptable for filing only within six months of a UCC’s lapse date. Continuations presented for filing prior to the six-month window will be refused by the filing office.

3. Watch the Original Filing Date
A Continuation Statement extends the term of the Financing Statement for an additional five years from the date of the original UCC1 filing, regardless of the filing date for the Continuation Statement. A filing’s lapse date is always calculated from the filing date (month and day) of the original Financing Statement.

To simplify the process, try working with a service company that offers a web-based UCC portfolio management tool. Many online UCC filing systems include UCC tracking features that will alert you when filings are nearing their lapse date, allowing you ample time to prepare continuations.

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FAQ Series # 3: How can I reduce my UCC filing costs?

First Corporate Solutions Team — Mon, 12 Apr 2010 05:53:26 +0000

The recession’s impact on the lending community has prompted many UCC filers to take a good hard look at their budgets in search of meaningful ways to reduce spending and increase profitability. As a result, First Corporate Solutions has seen a rise in the question, “How can I reduce my UCC filing costs?”

When you think about it, this is not an easy question to answer. UCC filers face the tough task of finding ways to cut costs intelligently, without sacrificing quality, jeopardizing priority or increasing their risk.

Here are a few small changes UCC filers can make that really add up:

Use Attachment Pages Thoughtfully

In most filing offices, including attachment pages will increase a document’s filing fee. Whenever feasible, fit your collateral description within the defined box on the UCC1 form. If your transaction requires a lengthy equipment or inventory list then you are probably unable to take advantage of this savings, but if your UCC needs only a short blanket statement, why not include it on the face page rather than pay extra for an attachment?

File Electronically

These days, most state filing offices and even some county jurisdictions allow for electronic filing of documents. The filing fee is often substantially lower for a document that is submitted electronically versus manual “over the counter” submission. In some cases, the electronic filing fee is a mere fraction of the manual filing charge.

To take advantage of the significant cost savings of filing electronically, consider working with a UCC service provider that maintains a private online filing system designed to transmit filings using the most efficient and affordable technology. As an added benefit, many online solutions include portfolio management and UCC tracking features.

Reduce Rejections

Rejected filings are costly for UCC filers in both time and money. A rejected UCC necessitates the preparation and shipment of an amended document and extends the funding cycle – opening the door for a competing claim to secure a priority position. To reduce your number of rejected filings, try utilizing a service company that will perform a thorough quality review of your UCC filings prior to submission.

For more tips on how to avoid rejections, see our previous blog posts:

Common Mistakes on UCC1 Financing Statements

Common Mistakes on UCC3 Change Statements

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Filing “UCCs” in Canada

First Corporate Solutions Team — Fri, 28 Aug 2009 19:04:38 +0000

Did you know that you can file a UCC in Canada? Okay, so it’s technically not a UCC since the Uniform Commercial Code system is an American one, but Canada does have a system called the Personal Property Security Registration System which is analogous to and based upon our UCC system.

This system, much like our Uniform Commercial Code, records and reproduces info regarding loans where collateral is used to secure the loan. This system also records and reproduces information regarding repair and storage liens.

If you need to file a financing statement, you will have to complete and submit a document, which has to be done electronically, to the Companies and Personal Property Security Branch of the Ministry of Government Services. Within 30 days of registering the financing statement, the lender must provide the borrower with details of the registration so that the borrower can review and advise of any errors as necessary.

Unlike the US, where financing statements are active for 5 years unless a continuation is filed, the lenders must select the time period for the registration, which can be for as long as 25 years, or for a perpetual period (note: this only pertains to business loans; consumer loans can only register for up to 5 years at one time). Once the consumer loan is repaid, the lender registers a “discharge” within 30 days, similar to our termination filings.

With proper licensing, both PPSA searches and registrations can be accomplished via remote database access. Many public records firms here in the United States have achieved authorization and can complete your Canadian requests efficiently and affordably.

Updated Post: Filing Financing Statements in Canada

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