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There are two methods to filing a UCC, one is to send in the paper filing either through a courier or through the mail. The other is to record the UCC electronically through the state’s filing system. Both are equally effective, but there are some things that need to be considered when determining which method to use. One thing to keep in mind is that states are constantly changing and updating their processes and systems, so make sure to review procedures for that specific jurisdiction prior to filing.
Filing UCCs electronically is typically much faster than visiting the required filing office in person or sending documents through the mail or via courier. Electronic filing allows for a UCC to be recorded in minutes. One of the biggest benefits of filing a UCC electronically is the speed at which the filing is completed. Of course, in most states a paper filing can still be submitted, although the turnaround is much lengthier, potentially taking days or weeks to get the UCC returned. Some states are moving to only accepting UCCs electronically and no longer accept paper filings; Colorado, New Jersey, and North Dakota are a few examples. On the contrary, the District of Columbia does not allow for any electronic UCC filing unless it’s through a specific service provider.
Cost is another big difference in filing electronically. Most of the time, filing online is more cost-effective than sending in the UCC form to the filing office. The fees required to ship, whether simply a stamp, a correspondent, or a courier fee, can all add up when sending in paper forms for filing. Along with saving on shipping costs, it’s common for the statutory fee to actually be less to file online rather than submitting at the physical filing office. Many states encourage online filing since it reduces the staff needed to process these documents. To increase the incentive for people to utilize the online tools, they charge less for filing. A majority of states charge less for filing online. California, Kansas, Missouri, Texas, and Wisconsin are some examples. It can also help reduce potential state indexing errors to allow for self entry of UCC data. A couple of states do consider filing online to be a convenience service and charge a bit more than if the filing were to be completed “over the counter.” Alabama, Illinois, and Virginia are examples of states that charge more for filing online, however, the additional online cost is still typically lower than shipping costs.
One thing to consider is that not every state has developed the ability to file a UCC that has an exhibit or attachment. When filing a UCC with an attached list of equipment or some other exhibit, depending on the state, your only option may be to send in the filing directly to the filing office. Connecticut, Michigan, and New York are a few examples of states that do not allow for additional exhibits or attachments when filing online. However, as time goes on more and more states are adding the technology on their websites to allow uploading of an attachment when filing.
Another thing to be aware of is that some of the software that states are using will change the data entered into a specific format to ensure their data remains consistent. This is just due to how the system was designed to gather and display the characters entered. It does not change or alter the effectiveness of the UCC filing. For example, if you enter all of the data in the Illinois state filing system, regardless of how you typed it, the system will automatically change the font as well as all the characters to upper-case lettering. Or like in Minnesota, paper filings will have punctuation or abbreviations made in the index that was not completed as such on the actual form. Again, the validity of the filing does not change. It’s just how the filing will be displayed in that particular state’s index.
Many times a filer will prefer to copy and paste the data into the state’s filing system to avoid retyping the information. This can help reduce the number of data entry errors. However, in some states, like Florida, for example, the online filing system does not allow for any copy/paste functionality. Another thing to be careful of when copying and pasting data is that the filing system or the copy-paste/function, may not properly translate all characters. So the filer needs to be extra diligent to ensure there are no errors in the fields they are completing for the UCC.
It’s extremely difficult for any filing system to be designed to have compatibility with all possible versions of all the different internet browsers. Some states function better using the Chrome browser, while others work better in Firefox, and some still work the best in Internet Explorer (IE). Knowing which browser to use when filing in any state is critical for obtaining the best results, if you aren’t certain, it’s best to utilize a service company knowledgeable in this area.
Acknowledgments & Exhibits
Prior to the ability to file electronically, UCCs all had to be filed in paper form and once the filing was complete, a copy of the stamped form was returned to the filer, oftentimes accompanied by an acknowledgment letter. The acknowledgment is a summary of the filing, usually listing the parties involved and filing information, including the date filed, lapse date, and filing number. Some states, like Minnesota, have done away with the acknowledgment letter when filing electronically. However, if you were to file via the paper form at the actual state office, you would receive the acknowledgment letter back with your results. Receiving or not receiving an acknowledgment with the recorded filing does not make the UCC more or less valid.
Additionally, on the paper form, there are multiple options at the bottom to show any special designations for the parties. However, when filing electronically some states do not offer these options online. When this is the case, the only option for reflecting these alternate designations would be to file at the actual filing office. Mississippi is an example of this, whereas the only alternative option they allow online is the Trust/Trustee designation. If a specific designation is required for your UCC, you may have to file via paper.
When filing in paper format if there are more than 2 debtors/1 Secured Party – the Additional Party Form needs to be attached to include the extra parties. When filing online typically the states will allow for unlimited party entry, but not always. There are some states that have a limit. Montana is one of the states that only allows a specific number of parties when filing online.
A party on a UCC can have any address listed on the form. However, some state systems will not allow the debtor to have an out of state address when filing online. Oregon is an example of a state that has this limitation when efiling. So if the debtor has an out of state address, the form must be sent directly to the filing office for completion. Or if the address is a foreign address, some online filing systems do not allow for foreign addresses and would thus have to be sent in paper form.
Many times, a UCC filing will have verbiage in the collateral section on the form AND an attached Exhibit A. Numerous states do allow for both to be added to the filing electronically, however, some do not have this capability. If the form needs to have both, the UCC will need to be sent to the physical filing office to be recorded. Another caveat to remember is that there are some states that only allow for online filings. So if there are both collateral and an exhibit on a filing, the filer or SP will need to decide how they would like to proceed and select one or the other, or possibly rewrite the collateral description. Additionally, when filing online there is usually no limitation to the number of characters that a state will allow in the collateral section. However, as there is an exception to every rule, there is a limit on characters when filing online in some states; Florida, Louisiana, and Tennessee to name a few. If the collateral amount exceeds the allowed amount then the filing will need to be sent directly to the filing office to be recorded.
Lastly, there are many different ways that state jurisdictions accept payment for filing a UCC online. Some states require an account to be created and prefunded so that fees can be pulled directly from the account when needed. Other states will track your account activity and then send an invoice at the end of the month. A few states require that the filing be paid for with an e-check/ACH method. Some states allow for the filing to simply be paid with a credit card individually.
There are lots of reasons, as discussed above, that show the benefits of filing electronically, as well as some unique instances in which a UCC form must be submitted in paper form to be recorded properly.
Whichever method you choose for your filings, one thing to know with certainty is that your UCC will be just as effective regardless of whether you file online or if you send in the paper form. The decision comes down to the ability to file quickly and secure the position as fast as possible, avoiding delayed delivery, as well as saving money by avoiding high courier fees.
Don’t hesitate to contact us with any UCC filing questions. Our staff is waiting to hear from you!
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