13 Jan 24

The Problem of Rogue UCC Lien Filings: What Businesses Must Know

| by

Last Updated on: 17th January 2024, 04:51 am

The Problem of Rogue UCC Lien Filings: What Businesses Must Know

Rogue UCC lien filings refer to illegitimate liens that are filed against a business or individual’s assets without their consent or knowledge. This can happen when someone files a fake financing statement with the state’s central filing office, encumbering property or assets that they have no legitimate claim over.

This issue has become more common in recent years. While the vast majority of UCC liens are filed properly, there are some concerning cases of people abusing the UCC filing process to harass others or extort money from them. Some key things for businesses to understand include:

  • The potential damage – Bogus liens can hurt credit ratings, interfere with sales of assets, scare off lenders/investors, and create major headaches to resolve.
  • Limited recourse – Getting the liens removed can be difficult, expensive, and time consuming. The filer usually faces no consequences either.
  • Preventative options – Businesses can pay for monitoring services to alert them of any liens filed against their assets. But protection options are imperfect.
  • Recourse options – If targeted, the business can sue for damages or to expunge the lien. But this takes time and money with no guarantee of recovering damages.

There have been some efforts to reform UCC laws and filing procedures to cut down on bad faith liens. But progress has been slow. With easy online access to file UCC forms in many states, rogue liens continue to impact far too many innocent business owners.

The full scope of this issue would require much more detail and legal analysis from those well-versed in commercial and business law. But in general, businesses should be aware of the potential for UCC lien abuse and options to monitor for and respond to illegitimate filings that encumber their assets.