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hello everyone and welcome to today's webinar accuracy is everything you see see financing statement debtor name essentials my name is Annie turbo Letty and I will be your moderator joining us today is Paul Hana field Paul is the associate general counsel for CSC where he is responsible for advising the company regarding real estate recording notary Uniform Commercial Code and other public record transaction services and with that let's welcome Paul Thank You Annie yeah as Annie mentioned my role at CSC is to provide or to serve as a subject-matter resource for all things related to the UCC search and filing process as well as other areas related to that and as part of my responsibilities in that position I participate in the industry I monitor legislation on a daily basis I monitor case law I pay close attention to everything that's happening with the use of the UCC search and filing process I'm involved with the filing officers organization I akka and I co-chair a task force on filing office operations and search logic for the the American Bar Association's business law section in addition to all that I frequently am on the phone with filing officers around the country at the state and local level with the troubleshooting and other issues so needless say I get a lot of information from a lot of different areas and the funnest part of my job is when I can come out and share that and that's what I'm doing today and and today I'm going to be talking about probably the most important aspect of the UCC filing process and that is the debtor name and the importance of getting it right the stakes are very high the consequences are harsh for not getting the debtor name correct and for that reason I first put together a program like this about almost 15 years ago now back when many UCC filers are still trying to understand the New Revised article 9 debtor name rules that had taken effect in 2000 one since that time filers have become much more familiar with those rules moreover the amendments to article 9 that took effect in 2013 help clarify the debtor named rules to provide greater certainty for both filers and searchers so today perhaps you should expect that everyone now files under the correct debtor name well unfortunately that is not always the case and to give you an idea of just how serious a problem it is I recently conducted a random search on a debtor named character string and then compared the organization debtor names on the records that were disclosed on that search with the public organic record for each entity and the result of that comparison found that 41% of the debtor names on those filed financing statements did not match the correct name set forth on the statutory source document for those names 41% now admittedly it was a small sample it was less than a hundred debtor names and for reasons we'll discuss shortly not every debtor name variation will render a financing statement seriously misleading nevertheless each of those insufficient debtor names creates risk for the secured party and in some cases a very very severe risk so why more than 17 years after the debtor named rules took effect our filers still making these types of errors and emissions at such an astonishing rate well there's multiple causes for one the debtor named rules are not intuitive and a filer simply can't rely on common sense to arrive at the correct debtor name another is a filers frequently take shortcuts to determine the debtor name and without realizing the risks that are involved there's other reasons as well and but regardless of the reasons for these errors it demonstrates that there is an ongoing need for education regarding UCC debtor names and therefore that's what I am going to provide today specifically this presentation we'll begin with some essential concepts to help understand the article 9 debtor name rules and the underlying policies next I'll review the standards for sufficiency of a debtor name for purposes of the financing statement and the role that the filing office standard search logic plays in the process then I'll explain the name rules by the type of debtor and how to correctly enter the debtor name on the UCC record and finally we'll take questions at the end of the program so for now we'll go ahead and get started with the essential concepts most important thing to understand about the that there's some important things that it's necessary to understand about the debtor name rules under article 9 the first is the importance of correct debtor names well the courts have shown a tendency to tolerate harsh results when it comes to errors and debtor names and in fact any error in the debtor name can render a financing statement seriously misleading a a finance and but seriously misleading if I mean a financing statement that fails to provide the correct name of the debtor is going to be seriously misleading as a matter of law what that means is that the court gets to decide not a jury or anything like that next it's important to understand what the purpose of the debtor name on a financing statement actually is it's not always what people imagine of some people presume it's there to identify the debtor others might believe it's there to communicate information about the debtor or indicate the debtors capacity but in fact the sole and exclusive purpose of the debtor name on the financing statement is to allow retrieval of the record so that searchers can find the record using clear and consistent debtor name rules as I mentioned during the introduction the debtor name rules are not always intuitive and that's because the debtor name required for purposes of the financing statement may not even be the name of the actual debtor it may be a name used to represent the debtor or expediency in the search and filing process so bear in mind that the sufficiency rules are designed to facilitate searches not to communicate information about a debtor name now when it comes to providing the debtor name the burden is on the secured party to get the debtor name right that's because it's not the searchers responsibility to figure out what debtor name or names a they are named variations they need to search they need to just look up the correct name and do their search that way so the burden is on the secured party is the beneficiary of the security interest also filing offices index the debtor name exactly as it appears on the financing statement what that means is that they when they receive a financing statement the filing office will type it in to the to the searchable index exactly as its set forth in the UCC record and everything in the name field winds up in the searchable index whether the filer intended it to be included or not so it is important to understand that anything that goes in the name field is the debtor name another important concept to understand is that the debtor name is not provided unless it's in the name field and this is because filing offices are not going to index names unless they appear in the name field because the only way that they know that it's a debtor name is if it is in the name field either of the written form or it's electronic equivalent and in fact if they're not in the name field they're not going to wind up in the searchable index and as a result they're not provided and they that they won't be a debtor name by which the fine and statement can be searched also important to understand that organization and individual debtor names are stored separately there are different debtor name fields in the in most state level filing office UCC systems and because they're stored in separate database fields they can't be searched in the in the same database field at the search logic they use different search logic for organization and individual names and the search logic that supplied will depend on whether it searched as an individual or organization name and it will only it will only search the field that corresponds to the type of name being searched in other words a search of an organization name is not going to pick up matches that were provided in an individual name field so there's this different search logic and it's applied differently there are a few filing offices out there that do do go ahead and store everything in one database field these are typically land record offices where but Florida does it as well and what you'll see is they'll enter individual names by last name first name middle name rather than using separate fields for all those but those are in the minority at the state level offices next we can move on and talk about the debtor name sufficiency rules the debtor name sufficiency rules are controlled by section 9 503 a of article 9 I see there's a little bit of latency on the slide so excuse me a second while they catch up but 9 503 a of article 9 is what controls the sufficiency of debtor names these rules are based on the type of debtor and in some cases based upon the type of collateral so 9 503 sets forth those rules of the debtor name for purposes of the financing statement if these if the filer fails to provide the correct name of the debtor then that's a problem because under 9 506 B if the debtor name provided on a financing statement doesn't comply with 9 503 a then the financing is financing statement is seriously misleading and it is not effective to perfect the security interest with one exception and that is there is a savings clause in 9 5 o 6 C note this is not a safe harbor it's a savings clause I'll explain why in a second but under 9 506 C if a search of the correct debtor name of the filing in the filing office records using the jurisdiction standard search logic would disclose the financing statement that fails to sufficiently provide the name of the debtor then that insufficient name doesn't render the financing statement seriously misleading so it's important to understand here that strict compliance with 9 503 a is required or it has to show up on a search conducted in compliance with section 9 506 C so in summary when it comes to sufficiency of a debtor name the debtor name either has to strictly comply with section 9 503 a and I mean strictly comply it's got to be exactly the same as set forth in the statutory source document so it requires an exact match to the debtors correct name for purposes of the financing statement now it doesn't matter how the filing office indexed it what matters is whether or not it is an exact match on the financing statement itself now if it doesn't exactly match if it doesn't exactly and strictly comply with the debtor name rules then the financing statement will only be sufficient if a search conducted under section 9 506 C would disclose the record and that means it has to use the jurisdiction standard search logic so we've got the two standards either it has to strictly comply with 9 503 a or it must show up on a search using the jurisdiction standard search logic on section 9 506 C and to understand what type of protection section 9 506 C really provides it's important to understand the model standard search logic and so I'm going to explain that a little bit here first the model standard search logic was developed as part of the revised article 9 drafting process back in the 1990s the idea was that because the debtor named rules are changing to a more precise standard that the search logic should help compensate a little bit from good-faith minor errors in things like spacing punctuation ending noise words at the beginning of the name and that type of thing and the way it does it is through a normalization process that's set forth in the model administrative rules for article 9 which are promulgated by the filing officers organization Ayaka here's how normalization works when somebody provides a financing statement and files it at the filing office what happens is the filing office computer system runs through runs it through a multi-step process the first thing it does with that name is it takes the name makes a case neutral then it removes punctuation it strips out ending noise words which are words that they're words phrases and abbreviations that indicate an entity's type then it will strip out the from the beginning of the name if it appears there and delete spaces and what you're left with is string of text lived from the name on the financing statement now when somebody conducts a search the name that is being searched is also normalized and only exact matches are reported at that time after both the name on the financing statement and the name on the on the search string is normalized and this process is going to normalize all characters in a debtor name not just those that that it would recognize so anything that goes in the name field is going to be organized or normalized and the result is that if there's any deviation at all there's a risk that they won't normalize the same way and here's an example of how that works this is an actual example out there we have the name on the public organic record which is the source of the debtor name for a registered organization Pitt pipeline company Inc somebody filed financing statement on this debtor and the name on the financing statement looks the same but if you look very closely you will see that they made a typo in company so they left out the P in company the result is it's not the correct name of the debtor because it's not the correct name of the debtor the financing statement will only be sufficient if a search on the correct name of the debtor would find it and the search is going to depend on whether it's normalized correctly using the jurisdiction standard search logic well if we look at how these two names are normalized you'll see then the name provided the first step is it makes a case neutral then it strips out the punctuation the noise words the deleted spaces and you're left with the normalized name now a search on pit pipeline company Inc is going to result in the normalization stripping out Inc and company and the punctuation and everything but the certain but it's not going to find pit pipeline company without the P because without the P it doesn't say company and the search logic will not dismiss that as an ending noise word so the normalized string will include that misspelled word but to normalized names do not match so a search on the correct name is not going to find the name with the with it with the spelling error and that will render the financing statement seriously misleading and not effective now there are some limits to what model search logic can do for example there are some performance differences with standard search logic and it can vary a little bit between states for example some states don't disregard all ending noise words some disregard just the last ending noise word they wouldn't disregard Company Inc they just read disregard Inc while other states would disregard both company in Inc many states work off of different noise word lists and there's other deviations in there but to top it off there's a number of states that don't use the model standard search logic they have something else which oftentimes is more precise a bottom line is when it comes to deviations in the debtor name never ever rely on the standard search logic to save an otherwise insufficient debtor name it's a very risky proposition because it's you simply can't rely on search logic it's too iffy so bottom line if there's an error in the debtor name it should be fixed as early as possible now I want to move on and talk about the correct debtor name by type and we'll begin with the most common type of debtor in a commercial transaction the registered organization now registered organizations that's a defined term in article 9 includes and entity formed or organized by the filing or issuance of a public organic record or the enactment of legislation a debtor a registered organization debtor name is sufficient only if the financing statement provides the name stated to be the name of the organization on the public organic record most recently filed with or issued by or enacted by the bio jurisdiction now public organic record is defined in article 9 as well and it includes the record initially filed with or issued by a state of the United States that forms an entity it includes egislation that creates an entity a record of a business trust that's required to be filed under state law it also includes subsequent records filed to amend or restate the name examples include the Articles of Incorporation for example a statute that forms a corporation there are corporations formed by statute and a declaration of trust that might need to be filed in order to comply with a statutory business trust law there are some things that are not public organic records that are sometimes mistaken for them and used as a source of a debtor name these include a certificate of good standing or the state's online business entity database unfortunately these are not records that can be relied upon because they may not match the name set forth in the actual public organic record and there can be deviations in fact there are frequently deviations there so here's an example of how to use a public organic record we have a corporation known as been Realty Group that's the name stated in the public organic record as the name of the of the corporation therefore that name must be the name that is provided on the financing statement and in this case that's what happened now been Realty group changed its name at some point it filed an amendment to the Articles of Incorporation and became brg group Inc well by doing this now after February 23rd 2017 the most recently filed public organic record is the amendment that restates the name and brg group is the name that must appear on any financing statements filed after that time also the debtor name must exactly match the name shown on the public organic record the financing statement must provide it exactly even if it doesn't look quite right for example in we have an example here where in the Articles whoever filed the articles put the the ending Noyes word of the debtor in quotation marks it doesn't quite look right but that's how exactly how it should appear on the public organic record or I'm sorry that's exactly how it should appear on the financing statement if that's the way it appeared on the public organic record here's an actual example of how important it is to get it exactly correct in Wisconsin there was a record filed with the Wisconsin Department of Financial Institutions on ISC Inc and there were two to financing statements filed on ISC Inc and if you look closely one of them has an extra space in the name well believe it or not that was enough to render the financing statement seriously misleading and not effective because the Wisconsin Department of Financial Institutions standard search logic does not disregard spaces with the extra space and the name it's not the name of the debtor and because of the extra space and the fact that the search logic in Wisconsin does not disregard spaces a search of the correct name did not find the name with the extra space and as a result it was seriously misleading and not effective I'm going to show you some examples now of financing statements that have provided incorrect debtor names start Jim Rob there was a case that arose out of Texas few years back Jim Ross tires Inc the secured party added the DBA following the correct name of the debtor and argued that that once you get the correct name in there anything after that should be disregarded the court correctly pointed out that no any extra information in the name field will effectively prevent it from being searched and as a result it won't be disclosed so the extra text is part of the name and by adding that the secured party made it seriously misleading not effective obviously a typo like I talked about earlier will render a financing statement seriously misleading because it won't disregard that the beginning of the name of the is misspelled also punctuation matters in this case the debtor name on the financing statement was kwm electronics but the actual better name on the articles had periods following the initials those did not make it onto the financing statement and as a result it's not the name of the debtor and the problem is that in Utah where it was filed Utah does not disregard punctuation it requires a more exact match and consequently it was found seriously misleading and not effective so some registered organization name tips to provide when when you're filing on a registered organization first of all it's important to conduct thorough due diligence any shortcuts carry risk don't you know going to the database rather than the the Articles of Incorporation for example is a risky shortcut because it may omit shueisha nor words and things like that be sure to use the name on occurred and use it identically to the way that it appears on the public organic record so put it on the financing statement with the exam spelling spacing punctuation word order and I even go so far as to say the same upper and lower case case doesn't matter that we're aware of at any state-level filing office and I've yet to confirm any County offices where upper and lower case matter nevertheless I think it's best to to be as precise as possible excuse me and never ever add anything to a debtor name never add any explanatory text descriptive information things like titles and capacity because all of these things do nothing but add characters to the debtor name that are not part of the debtor name they will be normalized and as a result they search on the correct debtor name typically won't find better names that have this added information um next i want to talk about the debtor name when the collateral ism administered by a decedent's personal representative what we used to call decedent's estate in this in this type of case the debtor name is sufficient only if the financing statement provides the name of the decedent and in a separate part of the financing statement indicates that the collateral is being administered by decedent's personal representative so really we have two requirements here the name of the decedent and the required indication these are both named requirements even though the indication goes somewhere else so some pointers on this first of all remember that the name of the decedent is an individual name it's the name the person had while they were alive and the the indication is not part of the name it has to be in a separate part of the financing statement and as a result of is added to the name it will render the financing statement seriously misleading and not effective now if you look at some examples that I have here here we have the name provided in the organization name field that has the indication in the name field this is going to be seriously misleading and not effective here we have the name of the executor it's the name of the decedent not the administrator and again the indication cannot go in the name field if it goes in the name field it becomes part of the name and it is no longer the individual name the person head it's now something else and those extra characters will in virtually all cases render the financing statement seriously misleading and not effective so a few pointers when dealing with this type of debtor name when you're dealing with an estate related debtor name like this number one remember that the name of the decedent is an individual name so you determine the correct name to use and roughly following the same procedures as you would for a living person and that means you know putting the the components of the name in the correct name fields it means you know verifying the full name not nicknames things like that now of course you'll see when we get to individual names that it requires the use of the driver's license to determine in many cases the correct use of the or the correct debtor name to provide for an individual but for a deceased individual the driver's license really doesn't a driver's license rule really doesn't apply but typically the best way to do it is the full first name full last name full middle name everything that need everything should be the full name there is a safe harbor for the name of the decedent on the financing statement and that is the name indicated on an order appointing the personal representative that's that was added by the by the amendments that took effect in 2013 so that's a clarification and of course the other thing is we need to provide an indication on the UCC record in a separate part of the financing statement that the collateral is being administered by decedent's personal representative the way to do that on the written form is to use the checkbox in item 5 didn't fit very neatly on here so I broke it up into two lines but the the checkbox is the way to do it if you've tried to put it in the debtor name that is going to result in a seriously misleading financing statement nearly every single time also if you're filing electronically electronically filed records will typically have the same checkbox available if there is no checkbox available for an electronically filed record then go ahead and enter it into the collateral field state that the collateral is being administered by the students personal representative but no matter what do not put it into the debtor name field if it's put in the debtor name field it becomes part of the debtor name and it will cause that debtor name to not match the correct debtor name and the financing statement will be seriously misleading and not effective the next type of debtor is for a collateral held and held it or when the collateral is held in the trust again for estates and trusts aside from a a trust that is a registered organisation like a statutory business trust the factor used to determine the correct name of the debtor is not the type of debtor but rather the status of the collateral so that's the case for a common law trust and in the case of a common law trust that the debtor name sufficiency rules are number one if the or if the organic record the trust specifies a name for the trust then the financing statement must provide the name specified if no name is specified then the financing statement must provide the name of the set lor or tested or and in a separate part of the financing statement there must be an indication that the collateral is held in a trust now if the name of the set lor or tested or is provided then there's some additional requirements that means in a separate part of the financing statement there must be additional information provided to distinguish the trust from other trusts that have one or more of the same set lures so the important thing to remember here is first of all the only permitted names for a trust the only names could be correct are the names or the news either the name of the trust or if the trust doesn't have a name specified the name of the set lower test state or those are the only names that are sufficient the name of the trustee is not sufficient as the name of the debtor unless the trustee is also the set lor of an unnamed trust the additional information and Trust indication if the if the name of a set law are tested or is provided that goes in a separate part of the financing statement it must not be provided in the debtor name fields if it is provided in the name field that information becomes part of the name provided on the financing statement and that string of text will not equal the string of text that represents the correct name of the debtor search logic will not find it and as a result it will render the financing statement seriously misleading and not effective in many many cases if additional information is provided to give you some examples here trusts trust related names do tend to be more confusing than other types and this tends to lead towards a lot more errors in the filing process in fact there are so many trusts related errors because of the different forms that trust related names are oftentimes provided we give you some examples of number of different ways the same trust can be provided on financing statements these are all the exact same trust every one of them is a common form of the name we see provided on UCC financing statements for the name of the trust and every one of these is possibly wrong it could be the DeLuca right revocable trust or just DeLuca revocable trust we can't know for sure unless checking the organic record of the trust because without the organic record the filer is not going to know how to file the financing statement they will not know whether the trust has a name or if it doesn't have a name what the name of the set lor or tested or should be and that leads to a lot of errors are not trusting the rules for this type of debtor name and there are plenty of examples out there they're very easy to find for errors in debtor names when it comes to trust related situations for example we have the the clearance gripping or declaration of trust agreement here the trust agreement is being named as the debtor and the trust agreement simply can't be a debtor an agreement is not a debtor so they did not provide the correct name it's probably either the you know the well it's probably the name of the the cell or test state or in this case based on the form of the name that's provided there it's you can't tell without looking at the organic record of the trust but it would be highly unusual for this type of thing to action maybe the name when the name is provided generally it's important to provide the name in the correct field and also to avoid providing anything extra in the name field for example we have the name of the trustee provided in the organization name field a couple of problems with that first of all the name of the trustee is not sufficient as the name of the debtor for purposes of the financing statement even though the trustee may very well be the actual better who granted the security interest this is a case where article 9 uses a name to represent the debtor rather than the actual name of the debtor itself just as it does with the collateral it's held in collateral that's being administered by the decedent's estate or decedent's personal representative so the name of the trustee is not sufficient likewise indicating a party's capacity is not sufficient and providing an individual name in an organization name field is typically not going to be sufficient because it will not be searched correctly using the correct search logic even if put in an individual name field if it has the trustee a capacity indication that will again prevent a search of just the last name from finding this financing statement because that string of text of the correct last name will not find the string of text that includes the capacity indication the trust of Aaron Neumann under agreement dated such-and-such again this is a very common way of providing the name of the trust yet if you look at the organic record of the trust I would be really surprised if it appears that way and that's because typically would say something like the trust of Aaron Neumann the name of the trust is the trust of Aaron Neumann not the agreement and the date of the agreement this is typically descriptive language that makes its way on the financing statement with the that it will render the financing statement seriously misleading and the Joao techie Inc has set lor under voting trust agreement dated such-and-such the name of the set lor may very well be the correct name to provide and in the organization name field if the set lor is an organization but here they've included the statement of capacity indicating that the party is a set lor is going to be a problem because that's not part of the name and as I've said over and over again indications of capacity or descriptive text and are not part of the name they get normalized as part of the name and they will prevent the search logic from finding the record it's important to think of these names as strings of text and not actually names and words in order to be the correct name of the debtor the string of text in the name field has to exactly equal the string of text that represents a correct name of the debtor for purposes of the financing statement and adding anything in there is going to make it so they they don't match it's going to leave it up to the search logic and the search logic simply isn't going to find it in these cases also this this one has included some descri tive language about the trust agreement that information is simply not something that should go in the debtor name field it needs to go in a separate part of the financing statement so as a result of this situation there are some important things to understand about providing the name of trust related or providing the debtor name on trust related financing statements the first thing is to remember that the financing statement uses a name to represent the data rather than the actual name of the debtor itself debtors trustee the name is either the name of the trust of the name of the cell or testator and it's always important to start with the Trust's organic record because without being able to view the Trust's organic record the filer is not going to know what name is required they are not going to know if name is specified and by specified by the way that's not just describing a trust it typically means something along the line of you know the name of this trust is much as you'd see for registered organization in the Articles it should be very clear and specified as to what the name is if it's not real specific then the the filer might want to consider providing the name a couple of different ways both the possible correct name of the trust and the name of the set law or tests state or if the name of the set Lord tested or is required it's important to know that there is a safe harbor and that is the name indicated for the set law or tested or in the trusts organic record so the the filer is going to be protected if they use the name exactly as it appears for the set lawyer tested or in the trusts organic record now it is important once the correct name is determined to provide the name correctly and that is to enter the name in the field that corresponds to the type of name this is really important if it's an individual name it must go in the individual name fields to be searched correctly if it is an organization name it must go into the organization name fields to be searched searched correctly in addition it's also a good idea if there's a conflict between the type of the actual debtor and the type of debtor name for example the debtor is an individual trustee but the the name that's required is an organization name for the trust you might want to also consider filing is the second debtor um the name in the field that corresponds to the type of debtor just so that if a court ever has to face the issue that they they would have the name in there either way and the reason why I recommend this i I don't think it's necessary but there are a lot of respected commentators out there the question whether you know this is this might be necessary and therefore it's probably a good idea to do it both ways if there is that conflict between the nature of the debtor and the nature of the name but I think it's most important to get the name in the fields that correspond to the nature of the name and optionally to also file it as an additional better in the field that corresponds to the nature of the debtor never ever add any additional information to the name field beyond that which is required by article 9 that includes any information about the trust or the set law or the test state or their capacity anything like that will almost certainly result in the string of text not equaling the correct name of the debtor and prevent the search logic from finding the record if a search is made on the correct name of the debtor also because that information the indication that's required must be made in a separate part of the financing statement be sure to use the check box to indicate that the collateral is held in the trust it's on the written form and the the electronic equivalent most electronic filing systems permit a check box to make this indication and those that do not have a check box for it if you're filing electronically and cannot indicate it by check box put it in the collateral do not ever put it in the name field the the article 9 name requirements specifically state that this indication and other information must be provided in a separate part of the financing statement that will come to individual debtor names and the individual debtor name rules that are out there during the enactment process of the amendments that took effect in 2013 there was some debate over whether to require the use of the driver's license as the source of a better name or whether to make it a safe harbor and there were some vigorous advocates of both positions during the drafting process and the the drafters finally decided that what they would do is they would offer both up as legislative alternatives in each state could decide which to enact the vast majority of states decided to enact what was called legislative alternative a and in this only the name on the driver's license is sufficient what this means is if the debtor has a qualifying driver's license then that is the name indicated on the driver's license is the only acceptable name for the debtor so in alternative a states if the debtor has a driver's license that is unexpired and issued by the state of filing then the name on that driver's license is the name that has to be provided if the debtor does not have such a driver's license then there is a second tier safe harbor that says if they don't have a qualifying driver's license or state ID card then they can the secured party can provide just the surname and first personal name of the debtor so important thing to understand here is that an alternative a state's the drive use of the driver's license is mandatory if they have an unexpired driver's license issued by the state of filing now most of the states that enacted this provision include language that says if they don't have a driver's license then the state issued ID card so the proper way in those states is to look at they have a driver's license if not do they have a state issued ID card that's unexpired and issued by the state and only if they don't have those - then you go to the second tier safe harbor and I believe in the handout materials we have a flow chart and a chart of the states that have the state issued ID in their statute those are all listed so you can see which which state is which alternative B was the safe harbor and an alternative B which is the minority rule and it's only been enacted in about six states and again those are indicated on that handout chart I described the driver's license is one form of correct name of the debtor but also the surname and first personal name or the individual name of the debtor whatever that might be those are all sufficient but again only I think six states enacted that there are other jurisdictions that may not have either of these because they haven't had enacted the amendments to article 9 yet these include the US Virgin Islands the Pacific territories which don't even have revised article 9 in effect yet and probably Indian a variety of Indian tribes have enacted secured transactions laws that don't have these rules in effect either but for the 50 states DC and Puerto Rico they do have most of them have alternative a in effect and as I said just the six out there that don't now it's not as simple as just necessarily looking at the name on the driver's license in order to use the driver's license as the source of an individual debtor name it's actually a three-step process the first step is to check and make sure it's issued by the state where the financing statement will be filed the second step is to check the expiration date it must be unexpired in order to serve as the correct name of the debtor for purposes of the financing statement if it is unexpired and issued by the state of filing then it's time to go on to the third step which is to extract the name from the driver's license and map it to the financing statement putting the components of the name in the correct fields bearing in mind that the the components of the name may appear in a different order than they appear on the driver's license or on the financing statement so the driver's license name components and the financing statement name components may have to be mapped a little differently to the correct fields and by the way if there is any question as to how to map these to the correct fields don't be afraid to provide the individual name in more than one way so that whatever name a court later decides for the whatever way a court later decides was the correct way to extract it is on the financing statement remember that the name on the financing statement is the debtor name for purposes of the financing statement and that would be the case even if the name indicated on the driver's license has a blatant error so that name with the blatant error also has to make it onto the financing statement and I recommend in addition to that if there is a blatant error to provide as an additional debtor the correct name as it would appear if the driver's license was correct and that's because if the individual were to go down to the DMV and get that fixed that would be a name change event and as a result the secured party would become unperfect Adele acquired more than four months after the name change event unless it filed an amendment to make the financing statement non seriously misleading but if the name is already there then the secured party is protected against these unexpected name changes and with a driver's license part of the issue is a driver's license is not a public record and unless the debtor remembers to inform the secured party that they have changed their name the secured party has no way of knowing that they've changed their name from what was on the driver's license to something else so the only way to protect really against that type of unexpected name change when there when the driver's license contains an error is to go ahead and up front in what it would likely change to now it's kind of a guess because you never know what the final license will be but it still it provides more protection than not doing that so if there are errors like that by all means it's a good idea to go ahead and put take action to protect against inadvertent name changes there are some states out there I am led to understand that might allow characters on a driver's license in a in a person's name on the driver's license that typically do not appear on the keyboard for example the Enya character in a Hispanic name may may appear on a driver's license the problem is that if if the financing statement doesn't provide this exact character arguably it's not the name of the debtor and the secured party will be unperfect adhere is to file the financing statement using that character it is one debtor and then also provide the name of the debtor spelled as it's likely to be searched if the searcher is unable to enter the actual character into the search system in fact a filing office may index Pena there is PE and a even though the financing statement provides the correct character but that's fine that's filing office is doing the filers responsibility is to get the name right and not to worry about what a filing office may do to it but it isn't a bad idea to provide it a couple of different ways to make sure that both the correct name of the debtor is indicated on the driver's license or on there and also the the way it's likely to be searched in case the filing office indexes it differently part of that is because when filing officers are confronted with a character that isn't on a standard keyboard like this they don't handle it in a consistent manner some jurisdictions may index it as PE na others would treat that character as punctuation so it would actually normalize to PE a others might delete the character entirely some might leave it to the indexing clerk's discretion as to how to index it regardless by providing it as a separate debtor in the way that it's likely to be searched the filer has some control over whether it will show up on a search there are errors that get made during the filing process when using driver's licenses most commonly this occurs because people don't trust the license like they're supposed to and there's a case of provides a good example of that it was called in rain a it was a case out of Kentucky there were two financing statements filed one had one spelled the middle name is mark the other one spelled the middle name is marked as in T at the end turns out the name on the driver's license was the one with the p on the end what probably happened here is whoever was filing the financing statement looked at the driver's license saw the T at the end assumed it was a typo and corrected it themselves when they were filing the only problem is that while the debtor named on that purse financing statement may be correct for all other purposes the name on the financing statement is the name of the debtor indicated on the individuals driver's license and if that T is on the driver's license it has to be on the financing statement and in this case the financing statement without the T on the end of the middle name was found seriously misleading because without the T it's not the name of the debtor for purposes of the financing statement and the standard search logic of the jurisdiction when searching on the middle name marked with the P at the end did not find mark without the T and as a result that financing statement that tiny error and actually what the filer probably thought was a good common-sense way and an intuitive way to fix a minor error in the driver's license wound up leading to a seriously misleading financing statement so the important thing here when it comes to individual debtor names first of all when filing on an individual in an alternative a state and actually in most alternative B states as well because the driver's license process works works pretty well begin by confirming the sufficiency of the license it has to be issued by the state where the record will be filed you must verify that the driver's license has not expired and if the debtor doesn't have a license or if state law allows an alternative non driver's ID then use the safe harbor option which means the surname and first personal name be sure to map the components of the name to the correct spaces on the UCC form or it's electronic equivalent that means extracting the name from the driver's license correctly and don't be afraid to provide as additional debtors different variations of that name in case there are questions as to how the name should be extracted for example what if there are four components to the name provided Mary Ellen June Johnson or something like that you know what is the first name what is the middle name could it have been a hyphenated last name because the state didn't permit punctuation and driver's license if you don't know don't be afraid to provide it more than one way and then it's also important to preserve evidence because the driver's license is not a public record the only way to show that was correct at the time of filing is to keep a copy of the license one other word of caution on this the individual name search logic doesn't really disregard any punctuation spacing or ending noise words like it does with an organization name so the you should punctuate the name exactly as it appears on the license if there's no punctuation on the license for example you know that they the person has a hyphenated last name but the - doesn't appear on the license don't add the - because the search logic will will not disregard punctuation or spacing like it would for an organization name for other types of organizations and this is really anything other than those that are that I've already covered it's really left to the filers best judgement if the if the debtor has a name on then the financing statement is sufficient only if it provides the organizational name of the debtor whatever that may be but there is no safe harbor for what to look for it's left to the best judgment of the filer and for that reason you know it's a little bit of a gray area in there there have been some cases involving this but bottom line is it really is left to the best judgment of the filer so the recommendations on this conduct thorough due diligence into the organization's name there may not be a single doc ment that can be a source of any other type of organization name and therefore it may be necessary to file one or more name variations as additional debtors to ensure that the correct name of the debtor makes it onto the financing statement whatever that might be another situation that can arise is what if there the debtor doesn't have a name well article 9 does deal with this issue if the debtor doesn't have a name then the financing statement is sufficient only if it provides the names of the partners members associates and other person that comprise the debtor the name must go into the fields that correspond to the nature of the name in other words you provide each of these names as if that person was named as a debtor in their own right so if you're your debtor is a partnership for example it might mean that the individual names of the partners might need to be provided each is individual debtors also exercise some caution don't assume that there is a name if there isn't necessarily one if you can't confirm that an organization has a name or their that the debtor has a name but it might have a name well go ahead and provide that name as a as a debtor but also cover yourself and provide the names of the partners members and others that comprise the debtor so that whatever court later decides was the correct way to do it is the way that the financing statement is filed next I want to talk about what happens when somebody figures out what the correct name is but then provides it incorrectly because there are ways to go about and file incorrectly an otherwise correct name and there have been some court cases on this and you know I think sometimes the outcome is pretty easy to to determine for example here we have Steven arvo Burrell it's an individual name but it was placed in the organization name field because the organization or the debt was related to an organizational acquisition so they put it in the organization name field and it was found to be seriously misleading because it wasn't provided correctly and because it wasn't provided in the individual name fields it could not be searched as individual as an individual named the a different search logic applied the data wasn't even included in the search the when they searched it as an individual name it didn't even look at organization names and as a result it was found seriously misleading and not effective here's another example of how to incorrectly provide names on Exhibit A there's a long list of debtor names each one of which the secured party is verified as being corrected a great investment of time and expense yet if somebody looks at how this is indexed all that's going to be indexed is what was in the contents of the name field those provided on Exhibit A are not going to be indexed because they're not in debtor name field so filing offices do not exercise discretion about what to provide for debtor names or howdy index debtor names if they're they just transpose that string of text in the name field into the searchable index whatever it is they don't care what it is they aren't worried about whether it's correct or not they take that string of text in the name field and they transcribe it exactly into the searchable index so whatever's in the name field is what's going to go into the index and if it's not in the name field it doesn't go into the name or it doesn't go into the index with the result that it cannot be searched the thing that bear in mind about these very long debtor names is that typically it correctly provided debtor name will easily fit within the space provided and in fact the filing office may not be able to index the entire text of a long debtor name some have up to 300 characters or more but in this case this was a index with the Illinois Secretary of State I think it was a hundred and eighty or 120 or 180 characters that they can index and as a result this is all that would appear in the debtor name which is a problem because the only unique identifier in that entire character string if you take if you read the whole thing at the very end of the character string there it states and known as trust number three one five that will not make it on to the five on into the searchable index so there's absolutely no way to search this in fact this is an Illinois land trust I'm not sure that this provides either the name of the trust or the name of the cell or test a door so probably isn't correct anyway but the only unique identifier doesn't show up because the name is so long a very good rule of thumb when filing on any any type of debtor name is that if the name doesn't easily fit within the space provided on the form or the viewable area of the electronic record an electronic filing system that should be a big red flag that something is wrong with the name and it's a good idea to go back check the statute and verify that the name on that you know the filer wants to provide is actually the correct name of the debtor for purposes of the financing statement so to sum up some of the best practices in dealing with debtor names really the most important thing to remember is that the filer should provide the debtor name on the financing statement exactly as it appears on the statutory source document and that means exactly spelling spacing punctuation ending noise words if the appears at the beginning of the name that's got to go in there and as I said earlier I even recommend upper and lower case match exactly the the case used in the source document in addition to that remember never ever add any information to a debtor name field that does not appear in that statutory source document some of the most common errors here include indications of capacity additional descriptive information such as the date of a trust or something like that and sometimes even the name history of the the debtor that's listed these this may all be helpful information to a searcher but the problem is if either won't get to the searcher or the searcher can disregard it because the they know it's not going to be an effective name and finally never rely on the standard search logic to prevent any type of error or omission in a debtor name from making the financing statement seriously misleading remember search logic can change your malfunction if that happens and the filer didn't provide exactly the correct debtor name I think that the and if the record fails to show up anymore it almost certainly is going to be a risk borne by the filer not by others so it is really important to get the debtor name correct after filing a financing statement it's a good idea to do a search to reflect to verify that the name was correctly filed if any deviations are found if there's any variation whatsoever I recommend filing an amendment as soon as possible to ensure that if the search logic is an issue that the correct name is on the financing statement at the earliest possible opportunity