What You Should Know Before Filing Your Own UCC Financing Statements in Florida
You have taken the meticulous steps to properly perfect your security interest. You may have spent countless frustrating hours going back and forth with your legal department to agree on the security language. You have created a collateral description that others have only dreamed about. You have overcome obstacles with your sales team and even with your customers. But now you are here — you have conquered the proverbial mountain.
You’ve done it all & you are ready to secure your right to payment!
And just like that, you are tumbling back down the mountain, because someone missed a keystroke when indexing your filing… poof… your security interest is gone.
OK, perhaps I’m a smidge dramatic… but, the devastation that accompanies an invalid security interest is real.
“I can do it!” Just because you can, doesn’t mean you should.
When we discuss the UCC filing process with creditors, we frequently hear “Eh, it’s easy, we just do it ourselves.” Recording a Financing Statement may appear to be a simple task, but appearances can be deceiving.
We’ve said it before & I’ll say it again, UCC filings are more than a form fill document! A properly perfected security interest requires a detailed and accurate security agreement and a carefully completed, reviewed and indexed Financing Statement.
There are 50 states and over 3000 counties in the United States, which means there are hundreds of different processes for recording Financing Statements and fixture filings. Our UCC experts are familiar with all recording offices & processes — after all, they are experts. In some states, the Secretary of State’s office is responsible for the recording of the UCC, while in others the state may hire a third party to process the filings.
Recently, our NCS experts conducted an audit of UCC filings filed by a state-hired third party in sunny Florida. The results were unfortunate.
What Our Experts Were Looking For – Errors
The state of Florida uses a private company to manage their UCC filings. Unfortunately, this third party Florida has hired does not utilize electronic data entry.
Most Secretary of State offices operate an online system and although each system is different, they are online nonetheless. However, Florida didn’t get the memo. No electronic data entry means that every filing has to be faxed and/or physically mailed to this third party and the staff of this third party will manually index the info into their system.
It should come as no surprise, but this third party makes mistakes and they don’t subsequently review their own data entry, so the errors can go unnoticed quite easily.
As you know, even simple errors in UCC Financing Statements can quickly invalidate a security interest. (Remember the ‘falling down the mountain’ analogy above?) Companies operate on margins of error, and those margins are typically low, so how does this third party stack up?
Our UCC experts tracked this third party’s errors in July & August, here are the results:
- July: 13% error rate
- August: 7.5% error rate
In the month of July, out of 477 filings, 62 filings had errors, which is a 13% error rate. These aren’t minor errors. These are errors in the entity’s legal name and address — errors that would deem the filing seriously misleading.
Fortunately for our clients, part of our internal process includes reviewing every filing once it has been recorded and indexed. In the event we discover errors when we review the filings, we contact this third party and request it be corrected. The third party may be annoyed when we point out their mistakes, but we are doing our job to ensure our clients’ UCC Financing Statements are indexed correctly.
Just Because You Can, Doesn’t Mean You Should
Yes, recording a filing may seem simple, but not everything is as it seems. If you choose to file your own UCC Financing Statements, you should always review the filing once it has been recorded and indexed. Don’t ever assume that the Secretary of State, or in this case a company hired by the state, has indexed it correctly.
Have a review process in place, or better yet, rely on our experts to handle your UCC filings for you!