What Is a UCC-3 Filing and Why Should You File One?

By Kristin Alford

Have you filed a UCC-1 to secure your interest in certain collateral? Well, if you have and you need to continue, amend, assign, or terminate your UCC filing, you will file a UCC-3. You may have already guessed, but today’s post is all about the UCC-3, including its magical powers. OK, it may not be magical per se, but it is certainly powerful and shouldn’t be ignored.

UCC-1, UCC-3, UCC-5, UCC-11

It may seem like an odd numbering system, but each form is important in its own right. A UCC-1 is the initial Financing Statement and is filed to provide notice to other creditors of your security interest. Typically, when we talk about perfecting your security interest or filing a UCC, we are usually referring to a UCC-1 or your initial filing.

Let’s skip the UCC-3 for now and jump ahead to the UCC-5 and the UCC-11. A UCC-5 is an information statement you file when you believe an existing record is inaccurate or was wrongfully filed. In compliance with Article §9-518, this statement should include reference to the original filing (the filing with the alleged errors). It should indicate it is an information statement and it should identify what you believe to be inaccurate in the original filing. It’s important to note, this filing does not amend any information – you will need to file the UCC-3 if you need to amend info.

The UCC-11 is an information request to determine whether there are other secured parties, whether specific collateral is already secured by a UCC, and to determine a creditor’s priority.

Bouncing back to the UCC-3. A UCC-3 Wears Many Hats. It’s true, a UCC-3 is used to continue your existing filing, amend your existing filing, terminate your existing filing, or assign your interest to another secured party.

Continuation

A UCC is effective for 5 years. If you need to extend the filing, you will file a UCC-3 Continuation within 6 months before the expiration date of the existing filing. Once the continuation has been filed, your UCC is effective for another 5 years. If you don’t file your continuation timely, your UCC will become ineffective.

How often should you continue a filing? It depends on what you are providing as the creditor. If you are a lender, and your customer’s loan period is longer than 5 years, you would need to file continuations every 5 years until the loan is paid off/closed, to maintain your security. If you are a distributor of goods, and your customer operates on a revolving line of credit with you, you should file a continuation every 5 years as your relationship continues.

I’m going to repeat what I just said moments ago: if you do not file a continuation timely, your existing UCC will become ineffective. And, as we’ve discussed on our blog before, you can’t revive your security interest; you will lose your place in line.

Amendment

Ah, UCC Amendments, let me count the ways! Why would you need to amend your UCC? The most common reasons to amend a filing include a change in your customer’s name or address, a change in your company’s name or address, or a change in the collateral.

The most common, and arguably most critical, reason to amend your filing is if your customer’s name or address changes. We talk about this a lot, because not only is it vital to your security interest, it’s also one that consistently stymies creditors. Article §9-507(c) clearly states you have a 4-month window to amend your filing for a debtor name change to maintain your priority. If you fail to timely amend your filing, your filing will be considered seriously misleading, and your security interest will be unperfected. Remember, names matter in UCCs, after all, a search by name is how parties identify whether a security interest already exists on certain collateral.

I mentioned you may want to amend a filing if your company’s name or address changes, and while this is not dictated by Article 9, it is a best practice. I recommend amending the filing to alleviate delays or missed notifications about a debtor’s bankruptcy. For example, let’s say your customer files for bankruptcy. The bankruptcy trustee will go through public records (i.e., UCC filings) to ensure notifications of the bankruptcy – including the mega important bar date info – are mailed to all parties. If your address is wrong and the mail is either delayed or returned, you could miss the bar date. Yes, you could likely argue you missed the bar date because you didn’t receive timely notification, but the court may say “Hey, not my problem, you should have maintained the public record.” Is it worth the hassle?

If there is a change in the collateral, you will need to amend your filing. Other creditors are relying on the information you provide to determine whether an interest already exists on certain collateral. If your Financing Statement doesn’t correctly identify the collateral, other creditors can assume there is collateral available for them to use as security – keep it current, don’t let that happen.

Assignment

If you need to assign or transfer all or some of your rights to the collateral to another secured party, you will file an Assignment.

9-514 Assignment of Powers of Secured Party of Record

(b) [Assignment of filed financing statement.]

Except as otherwise provided in subsection (c), a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which:

(1) identifies, by its file number, the initial financing statement to which it relates;

(2) provides the name of the assignor; and

(3) provides the name and mailing address of the assignee.

Assignments occur frequently with banks, as one bank transfers its security to another bank.

Termination

Seems fitting to end today’s post with Terminations. The filing of a termination ceases the effectiveness of the original UCC. Typically, terminations are filed at the end of the relationship when monies have been paid and/or collateral returned. As an example, your bank filed a UCC when you signed for your car loan; once your car loan is paid off, the bank terminates their UCC, which frees up the collateral (i.e., your car).

Use caution when terminating filings because you can’t un-terminate them. If you need a billion dollar warning, check out How JP Morgan Chase Bank’s Billion Dollar Mistake Can Make You a Better Credit Manager.

About the author:

Kristin Alford is an Education & Marketing Specialist with NCS Credit. Over the last 14 years, Kristin has provided credit professionals with relevant industry news and educational resources. Since 1970, NCS Credit has been the leader in providing credit professionals throughout the U.S. and Canada with proactive solutions to secure receivables, minimize credit risk, and improve profitability. Specializing in commercial collections, the preparation and filing of mechanic’s liens and a full-service UCC filing program, NCS Credit provides superior service and customized solutions to meet your needs.