Risk Management Blog

UCC & Corporate Due Diligence

Resource Guide for Legal and Financial Professionals

State-Level Only Lien Monitoring Programs Only Tell Part of the Story

July 13, 2017 UCC, Due Diligence, Reduce Financial Risk, Lien Monitoring

Once a creditor has filed a UCC Financing Statement and perfected their security interest, maintaining that priority position throughout the life of the loan becomes paramount. Many choose to employ lien monitoring programs which run interval searches on debtor names to check for any new filing activity, and then provide timely updates that alert creditors to potential threats that may jeopardize their ability to collect.

Monitoring provides a simple and economical way for secured parties to pay attention to other lien holder activity against their debtor. Some of the most common lien monitoring programs available offer state-level lien searches only. Service providers can offer state-level only lien monitoring programs for a very small fee, making them attractive to cost-conscious lenders.

However, in many cases, state-level only lien monitoring does little to protect creditors from priority challenges.

For example, Federal Tax Liens are typically considered the most urgent of all liens because of their potential to prime a perfected security interest, but many states do not maintain Federal Tax Lien records at the state level filing office (the same can be said about Judgment Liens). This can be especially true when dealing with individual debtors rather than business debtors. In these jurisdictions, only a search of the county index will uncover Federal Tax Liens (and Judgment Liens) since that is where they are filed.

When evaluating lien monitoring programs, it is important to recognize that many states do not maintain Federal Tax Lien or Judgment Lien records at the state level filing office. Nevertheless, these liens have the potential to prime a perfected security interest. That’s why state-level only lien monitoring programs only tell part of the story.

Do you monitor the county for filings that have the potential to prime your perfected security interest? Want to learn more? Contact us today and speak with one of our documentation experts and learn how FCS’ Monitoring Services, complete with affordable, accurate and timely reporting of county lien filings, are designed to take the headaches out of your post-filing lien, business entity and bankruptcy monitoring processes.

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