UCC Filing Basics for Lenders

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Annie: Hello, everyone, and welcome to today's webinar, "UCC Filing Basics for Lenders." My name is Annie Triboletti. I will be your moderator for our session today.

Joining us today are Russ Lash and Julia Cleaver. Russ is a financial account manager at CSC. He's responsible for building relationships with our customers. Since joining CSC in 2010, Russ has improved the customer experience by shortening workflow turnaround times and decreasing processing times. Russ has also helped to improve Uniform Commercial Code delivery times for our clients. Julia is a sales engineer at CSC, specializing in UCC filing solutions and workflow optimization. Since joining CSC in 2006, Julia has worked to provide comprehensive solutions to our clients that specialize in secured transactions. She provides initial onboarding and training as well as in-depth demonstrations of CSC's comprehensive UCC portfolio of solutions, including CSC Lien Perfect for Lenders.

So with that, I would like to welcome Russ and Julia.

Russ: Thanks, Annie, for the introduction. Before we dig into the content, some facts about CSC's UCC business. We monitor 9 million UCCs annually. We process 7 million UCCs annually. One hundred and twenty-five plus companies moved to CSC from competitors. About 3,000 of our 5,000 UCC customers are banks, lessors, factors, and capital companies. We also maintain a 91% NPS. More about this later. And we have the largest UCC database in the industry.

These bars indicate our NPS. NPS stands for Net Promoter Score. Net Promoter Score is a customer loyalty and satisfaction measurement. Scores at 70% and above are considered outstanding. CSC averages 91% among these 4 areas —customer service, accuracy, knowledge of UCC requirements, and UCC responsiveness.

About CSC. We are the world's leading provider of business administration and compliance solutions. We are spread across five continents. We have 125 years under common ownership. We provide world-class customer service, as indicated by our 91% NPS.

CSC has a global presence. We're in the Americas. We're in Europe and the Middle East and also Asia-Pacific region.

CSC doesn't only offer UCC and due diligence solutions, but also business compliance, domain security and brand protection, funds, and capital markets.

Today's agenda, essential UCC concepts, filing basics and best practices. Then we'll cover additional resources. Then Julia will present a demo on Lien Perfect for Lenders. And then we'll finish with questions and answers.

Essential UCC Concepts: Perfection and Priority, which are two important terms. Perfection protects third parties that are not subject to the security agreement. The most common method is by filing a UCC financing statement, also can be referred to as a UCC1. Sometimes I get questions about a UCC1 and a UCC3. UCC1, of course, is the original statement. A UCC3 would be something like a continuation, termination, amendment, assignment, those types of statements. And it makes security interest enforceable against the claims of third parties.

Priority, the order in which the competing claims are satisfied. The general rule is that priority will rank from the earlier time of filing or perfection, with the exception of purchase-money security interest, also referred to as PMSI.

Essential UCC Concepts: Notice Filing. The UCC is a notice filing system. It merely indicates that a security interest may exist. UCC records provide minimal information. So UCC records do not provide all the details of a transaction. Because of that, duty of further inquiry. Interested parties are not permitted to rely solely on the contents of filed UCC records. Additional research may be needed.

More Essential UCC Concepts: Role of the Filing Office. The role of the filing office is ministerial. Article 9 removed filing office discretion from the filing process. Filing is a machine process. So in other words, this means that the filing office will not check the UCC for errors, omissions. It will just simply record the UCC filing.

Duties. Index records for retrieval by debtor name or file number, and it will reject only for a reason set forth in Article 9, Section 516(b).

The filing office has no duty or power with respect to perfection, priority, effectiveness.

All right. Next up is Filing UCC Records, Basics and Best Practices. UCC Filing: Duration and Effectiveness. The general rule for duration of effectiveness. Financing statements are effective for five years from the time of filing. Now, there are some exceptions to that five-year effective period. The exceptions would be Wyoming, which has a 10-year effective period, a public finance and manufactured home transaction, that would be a 30-year effective period. Or transmitting utilities, these are effective until terminated.

Continuation of effectiveness. Effectiveness may be extended for an additional five years by filing of a continuation statement. Additional continuation statements may be filed every five years, with one caution. A continuation statement must be filed within six months before the lapse date. Our expiration tracking, which is included with our UCC filing service, will notify you of UCCs that are coming up for expiration within this range, before they lapse.

UCC Filing Location, the Governing Law. Generally, the law of the state where the debtor is located, under Section 307, governs perfection and priority.

Location of the debtor, different circumstances here. Registered organizations, like corporations, LLCs, etc., you want to file where organized, as indicated in Section 307. Other organizations, that are not registered organizations, would be located at the place of business, or if more than one place of business, the chief executive office, also indicated by Section 307. For individuals, located at principal residence. Think of driver's license for something like that. Other debtors, special rules apply for a registered organization under federal law, a foreign bank branch or agency, a foreign air carrier in the United States.

Essential UCC Concepts: Perfection and Priority. If the debtor's location lacks a filing system, you want to file in the jurisdiction where debtor is located only if it has a filing, recording, or registration requirement to obtain priority over the rights of a lien creditor. If not, the debtor is located in Washington, D.C. or District of Columbia. Some examples, the debtor is located in a foreign country, and the debtor is located within some tribal jurisdictions.

UCC Filing Office Within a State. The general rule, central filing office, secretary of state, or equivalent. There are exceptions to the central filing, such as states like Georgia, Louisiana, and Oklahoma.

And the exception to central filing because of real estate-related collateral, these types would be collateral such as fixtures, timber to be cut, minerals to be extracted. The filing location indicated here, law of the state where the goods are located governs perfection by a fixture filing. And you want to file in the office where a mortgage would be recorded on the affected real property.

UCC Financing Statement Contents. You have the debtor information. We have an arrow indicated next to the name. You want to get the name right, the debtor name right. That's crucial on a UCC filing. You also provide the address. Secured party information, of course, the name and address there. And also the indication of the collateral.

Essential UCC Debtor Name Concepts. Purpose of the debtor name field, to allow retrieval of the record using clear and consistent rules, which is why the debtor name on a UCC is so important.

Debtor name requirements in Article 9, Section 503. It provides the requirements of the debtor name for purposes of the financing statement. The required name is not necessarily the actual name of the debtor. And the requirements are based either on the type of debtor or the status of the collateral.

Essential UCC Debtor Name Concepts. Filer is solely responsible for providing the correct name. Onus is on the secured party. Filing offices must index the debtor name exactly as it appears in each name field on the record. Filing offices only index names provided in the record name fields. So in other words, kind of going back, filing offices do not check the UCC for errors or omissions. That would be up to the filer to make sure that everything is correct on that.

So consequences to it. All contents of the name field become the debtor name, whether intended or otherwise. A debtor name is not indexed unless it's provided in the debtor name field. And a name provided in the wrong debtor name field is not provided.

Important thing to know. Correct name must be correctly provided. Format errors can be just as bad as spelling errors.

UCC Debtor Name Requirements. For registered organizations, that would include corporations, LLCs, business trusts, etc., you will provide the name exactly as it appears in the "public organic record." Think articles of incorporation. For individuals, provide the name indicated on the debtor's driver's license, or if authorized by a particular state's law, the ID card issued to non-drivers, Section 503(a)(4).

Collateral administered by a personal representative, you want to use the individual name of the decedent. You can also check the box on the UCC to indicate the status of the collateral.

Some More UCC Debtor Name Requirements. Collateral held in a trust, the name of the trust, if it has a name. Otherwise, the name of the settlor or testator. See Section 503. In a separate part of the financing statement, provide additional information to distinguish the trust from other trusts having one or more of the same settlors or testators. You want to indicate that the collateral is held in a trust using a checkbox. That's indicated on the UCC form. Other organizations, provide the name or names that could be correct after conducting sufficient due diligence.

What if a debtor has no name? Provide the name(s) of the individuals and entities that comprise the debtor as if each was the debtor.

UCC Debtor Name Sufficiency. Debtor name must comply with Section 503(a). Even minor deviations can make the financing statement seriously misleading. We highlighted that in red because that's important to know. It's very important to know, that bullet point right there. It's not determined by filing office discretion. Again, the filing office does not check the UCC filing for errors or omissions. They just simply record the UCC.

Savings clause. Search on the correct name discloses financing statement that fails to sufficiently provide the debtor name. Some permissible deviations in most states would be like spacing, punctuation, noise words, a beginning "the."

All right. Next up is some information about CSC Lien Perfect for Lenders. CSC Lien Perfect for Lenders is a next-generation platform redefining how lenders manage UCC filings. Built on decades of industry expertise and direct client feedback, this all-in-one solution was designed specifically for the financial services industry, and it includes the industry's largest online UCC database, providing more UCC records and delivering faster results than any other UCC filing service.

On the right, some highlights of Lien Perfect, such as dual filing view, workspace, CSC Entity Check, and state and county validators, and many others.

CSC also offers business-to-business integrations, also known as API integration, to securely integrate your existing customer relationship management or loan processing systems with Lien Perfect for Lenders for greater accuracy and efficiency in the filing process. We can integrate with some common ones, such as Salesforce, Odessa, LaserPro. We can also integrate with your proprietary system.

File in Lien Perfect with Accuracy. We offer real-time validation. You can draft filings that are evaluated based on jurisdictional rules, including required forms, character limits, and jurisdictionally-specific data capture requirements. We offer a party and collateral library. Frequently used secured party and collateral statements that can be stored for reuse, eliminating data entry errors. It will also save you much time in the filing preparation process.

And you can also add to the UCC3 amendment filings. You can create UCC3 filings utilizing our linked UCC filing view to pull the most recent party information as well as collateral, legal descriptions, and filing information into your UCC3 filings.

Another important element on everybody's mind is security. The world's largest banks trust CSC. In fact, more than 3,000 financial institutions trust CSC largely because of our security measures. Why?

All CSC applications and data are maintained on CSC servers at a U.S.-based ISO 27001-certified and SOC-audited hosting environment. SOC 2 Type II assessments are conducted annually by third-party auditing firms for CSC. And we employ stringent data access processes and controls and have business continuity and disaster recovery in place to ensure no interruptions to your daily workflow.