Privacy and UCC Filing Requirements

by Sam Ott

Do You Ignore The UCC-1 Tax ID Number Box?

Based on comments at seminars and discussions on Bankers' Threads, it appears that most financial institutions do not list the debtor's social security number or federal identification number on the UCC-1 financing statements that are filed with the filing offices. Lender generally cite concerns with identity theft or customer privacy since once the financing statement is filed it is a public document that is available to anyone.

At first glance this appears to be a reasonable procedure, since the information is not actually required by Revised Article 9 and the omission of the data is not grounds for a filing officer to reject an otherwise acceptable document. But wait -- not so fast. Are you sure that is the case in all states? Before you answer you might want to review the statutes and filing instructions from the states of North and South Dakota where privacy and UCC filing requirements are on a collision course.

You will find that both states have adopted non-uniform provisions that require the UCC-1 to contain either the debtor's social security number or Federal tax identification number in order to be valid. In addition, North Dakota filing officers may reject the filing even if all other information is provided and the appropriate fee is submitted.

North Dakota
The North Dakota Statutes state in section 41-09-73(1)(e) that a financing statement is sufficient only if the statement provides the social security number or federal tax identification number of the debtor and section 41-09-87(2)(h) indicates that if the information is absent, the filing officer may reject the filing. The instructions from the North Dakota Secretary of State's Office also indicate a filing will be rejected if the social security and/or tax identification numbers are not listed for all debtors.

South Dakota
The rule in South Dakota appears to be somewhat more confusing. Section 57A-9-502(1) of the South Dakota Statutes states that a financing statement is sufficient only if it provides the name of the debtor and either the social security number or the internal revenue service taxpayer identification number of the debtor. However, Section 57A-9-516 states that the communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing unless the filing is refused by the filing officer. A specific list of reasons for rejection is noted, but failure to provide the social security or tax identification number of the debtor(s) is not listed.

It appears that a financing statement that does not contain either the debtor's social security number or tax identification number could not be rejected by a South Dakota filing officer but the filing itself may not be sufficient to perfect the secured party's security interest.

If you have filed any Article 9 documents in either state after July 1, 2002 or plan to do so, I suggest you review the applicable statutes and instructions to make sure your documents have been or will be valid and properly filed.

First published on BankersOnline.com 7/16/02