Today’s lenders need accurate and actionable debtor data, and many financial institutions rely on third-party providers to deliver it for them.
All UCC information resides in the same place — secretaries of state — before it’s aggregated and delivered to a lender by a service provider, so it would appear to be a completely level playing field.
However, not all data resources are created equal. It's how the information from secretaries of state is further vetted that makes the difference between diligent lending and sloppy management of assets.
What is data quality, and why does it matter?
Data quality can be defined by its accuracy and its currency. In other words, the data needs to be correct, but it also must be timely. Both of those areas work together to ensure that lenders get the data they need, so they can make wise decisions. If data on potential borrowers is current but rife with errors, the lenders using it may unwittingly make riskier decisions. Similarly, data that was 100% accurate at one point in time but late in being reported can be rendered meaningless in the commercial lending world that seems to move at the speed of light.
But correct data, delivered at the right time, can provide lenders with exactly what’s necessary for protecting their own interests and growing financially.
The process is fallible
You have probably heard the computer programmers' saying, "garbage in, garbage out." That adage applies to a lot of things, especially subpar borrower data that are relied on for making lending decisions.
The reality is that there can be significant gaps in the quality of data residing at the secretary of state level. Whether through an error on the part of the filer, or a hiccup in the filing process, 20% of UCCs are filed containing one or more errors. Sometimes these errors are as minor as the omission of a piece of punctuation. But no matter how small, those errors can cost a financial organization millions of dollars (or more). If a lender is not paying close attention, errors will make their way to the middle of a valuable financial decision. Beware of the fastest or the cheapest data source as it may only be “rebroadcasting” erroneous information from a secretary of state.
The reality of currency dates
Data currency refers to the date through which information can be considered accurate. At the state level, for instance, all filings might be verified through, let’s say, the 20th of the month. If today’s date is the 25th, we would understand that a particular borrower’s information would be confirmed accurate as of 5 days ago. That’s important for a lender to know, as the closer to today’s date the posted currency day is, the less likely it is for debtor to have been able to further extend themselves financially, such as entering into a loan agreement with another creditor.
But speed isn’t the only thing to think about when reporting currency dates. If a lender is accessing currency data from a third party that’s simply been copied verbatim from a secretary of state website, they might be missing an important part of the story. By simply copying and pasting from a secretary of state's website, a service provider is just serving as a conduit rather than a part of the data verification process. It’s not that the data is incorrect, per se. It’s just not actually representative of the date through which the information can be considered most accurate. That level of accuracy only comes from additional verification steps taken by the provider.
Our approach
At Lien Solutions, we set our currency dates using additional independent data points to ensure complete accuracy. We also use statistical analyses that are state-specific to more fully and clearly define the currency date. Additionally, the currency date we use is not shared with our clients until database pre-loading checks have passed. Even then, we won't certify the data as current until any discrepancies have been addressed with the state and solved.
A lender might very well find a more current data date published by a third-party service provider, but it may not have been vetted to ensure correctness. For example, was the data checked against what the provider knows to be true based on their own work? Does the provider even have staffing with the ability to analyze data? Or is the data treated like a commodity and the provider simply a middleman?
The Lien Solutions five-step process for data quality assurance
Our five-step data quality check is born from a team of professionals with combined experience of more than 50 years of analyzing data and defining automated checks.
1. Filings & incorporations count
Based on significant historical analysis, we understand the average numbers of UCCs and incorporations filed in every state. During every data load, we compare the daily counts against the state averages. Any that are below the threshold get flagged so they can be further investigated.
2. UCC filing check
Because we're the market leader, we focus on confirming every filing we have made in the daily data load. That helps ensure that the data is complete and accurately recorded by the secretary of state. We can see immediately where errors were made and move immediately to correct them.
3. Missing sequences check
Most states use sequential numbers for their filings and corporations. In the data for those states, we look for any gaps in the corporation or filing number sequences provided to us. If we find a gap, we go to the secretary of state's website and look for the missing data. We then contact the state to inform them about the problem. Once the data has been updated by the state, we update it in iLien as well.
4. Over or under target count check
We conduct regular historical analysis of UCC data, and that's how we know what the average record increase or decrease should be per load and by state. With that data, we also check to ensure we've received a number of records that falls within the range of previous data loads. This helps to calibrate the data quality checks.
5. Missing UCC image check
For states that provide copies of images of UCC documents, we look for anomalies and cross-reference the state's data with the UCC images*. This helps to ensure that the data is accurate and complete.
The Lien Solutions data quality team
Because we understand the data inside and out, we can also help our clients understand it and determine how it affects the loan and lien decisions that are made.
With the long-standing relationship we've established with state jurisdictions, and continued improvement in technology, we're not only able to provide high-quality data to clients, but we can also report back to the states when their data may be incorrect and need updating.
By linking state data to the lender's filings, we’re able to show our clients what their entire lending landscape looks like, not just a pinpoint of their data. An understanding of the whole portfolio makes lien and loan decisions easier and helps companies focus on their customers.
Lenders need more than just a search engine or a collection of data-collecting machines. Debtor data is the very foundation upon which a smart lending operation is built. It’s imperative for lenders to be fully aware of every aspect of the data they use, and whether it’s worthy to be used in making their most important decisions.
At Lien Solutions, we stand behind the quality and value of the data we provide and are committed to strong quality checks to provide the highest and most complete level of data accuracy. Our clients expect — and deserve — nothing less.
If you are concerned about the data that you receive from your current lien solutions provider reach out to one of our representatives to discuss how Lien Solutions can assist you in receiving high-quality data to help you make informed decisions.
*The image check is performed for all U.S. states and DC, except Hawaii, Louisiana, Michigan, North Dakota, Nevada, South Dakota, Tennessee, Utah, West Virginia, and Wyoming.