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Why Was Your Article 9 Filing Rejected?

by Sam Ott

Two separate UCC Article 9 Financing Statements are prepared by the same bank officer and sent to two central filing offices in two different states. One filing is accepted, the other rejected. After the rejected item is reviewed, it is determined that both statements were completed in the same manner. Of course, the debtor's information and the collateral description were different, but everything else was identical. How did this happen? Did the filing officer make a mistake? That is possible, but the difference could be the result of variations in state law and filing office administrative rules.

The revisions to Article 9 of the Uniform Commercial Code eliminated most of the subjectivity of a filing officer regarding the acceptance or rejection of a filing; however, there are some jurisdictional deviations.

If a filing is submitted on one of the model forms, or in an electronic format adopted by the applicable filing office, and contains the correct basic information, it will most likely be accepted. The basic information includes the names and addresses of the parties, general information regarding the parties, a description of the collateral and, of course, the appropriate filing fee must be paid.

If there are problems with the documents, however, the filing may or may not be rejected, depending upon the jurisdiction. Filing officers in various jurisdictions react differently to filings that are submitted with errors or omissions. These discrepancies occur, in part, due to the fact that each state legislature had the ability to adopt non-uniform sections of the Model Act and a number of states did so. In addition, each central filing office adopted its own administrative rules regarding the application of RA9 in its state. The International Association of Commercial Administrators (IACA) has formulated a chart showing the Jurisdictions Guidelines for Refusing a UCC Record Presented for Filing, that details the differences. (For quick reference, the chart is included in the "Central Filing Web Sites & Other Info" area of BOL's Article 9 Central.) IACA is a professional association for government administrators of business entity and secured transaction record systems at the state, provincial and national level in any jurisdiction that has or anticipates development of such systems.

The information for the chart was obtained from 42 of the 52 jurisdictions that have adopted Revised Article 9. The filing offices were asked to indicate how they would respond to certain filing problems.

Most of the responses to the inquiry were as expected, but there were some interesting nuances in some jurisdictions. For example:

Initial Financing Statement UCC-1
Debtor Information
--If the filer provided both an organization name and an individual name, all but four filing offices would reject the filing.
--If the debtor's city was provided, plus either the state or county but no address, sixteen filing offices would reject the filing.

Collateral Information
--If no description of the collateral is provided, only one filing office will reject the filing.

Financing Statement Amendment UCC-3
A majority of filing offices will accept a filing but will not index the information or take any further action in the following situations:
--The information is provided on an attachment rather than on the form.
33 filing offices
--The "change", "delete" or "add" box is not checked and only the current information is provided.
35 filing offices
--Collateral change information is provided but the requested action box (deleted, added, restated, or assigned) is not checked on the form.
39 filing offices

--If the filer checks more than one action (termination, continuation, or assignment), 13 filing offices will reject the filing because their systems will not allow multiple actions. Other offices will accept one action and completely ignore the other(s).

--If the words "same," "N/A," "not applicable," "none," "see attached," "see addendum," "see exhibit," or comparable phrases are used, the Arkansas filing office will reject the filing. All other responding filing offices will ignore the words and not try to interpret them.

Customer Service Issues
If filing requests such as "file first" are made in cover letters or post-it notes, all but one of the responding filing offices indicated they would use reasonable judgment to accommodate the request.

The chart makes it clear that even though all filing offices are operating under very similar rules and regulations, what may be accepted by one filing office may not be accepted by another. If in doubt, always check with the appropriate filing office if you have any question regarding how a filing officer will view a particular filing.

REMEMBER -- The procedures discussed above regard action by the filing office only. Check the chart for the jurisdiction your're dealing with. We hope the offices which had not formerly responded will eventually do so and the chart will be updated. Keep in mind that the fact that a filing is accepted does not indicate that a security interest has been properly perfected, amended, terminated, continued or assigned. Even if it is accepted for filing, you aren't necessarily home free.

First published on 8/19/02

First published on 08/19/2002

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