Legal Research

Nebraska's governor signed into law LB 851 which revises § 9-506(b) effective July, 2008.  This revision gives UCC filers the ability to file a statement with only the correct last name of the debtor if the debtor is an individual. The first name and middle initial can be shown on the filing as initials, nicknames, or even as a typo. There is no incentive for accuracy. The intent of the new law is to provide secured parties with greater certainty that errors or omissions on an indvidual's debtor's first and/or middle initial would not make a financing statement seriously misleading.

However, this means that now a searcher using reasonable due diligence must search be using only under the last name (this aspect has not changed) and then review all hits to determine the proper subject of the search. The first names and middle intials will now be harder to use for a match. This will be especially troublesome for searching debtors with common last names. For example according to The UCC Filing Flash (www.ernstpublishing.com), there are over 2,600 unique active records on the Nebraska UCC search web page under the last name Johnson.

Per the UCC Filing Flash "Under the provision as written you may not conduct a § 9-503(a) compliant search by entering any more than the last name. In other other words, a search for 'John Smith' does not meet the criteria for safe harbor any longer.

The bottom line is that industry people are recommending that lenders consider not lending to anyone with a common last name until the Nebraska legislature reverses this deficiency.

For more information, visit the state's legislative site at www.unicam.state.ne.us and search using LB 851.