Article 9 of the Uniform Commercial Code (UCC) defines a current account as a receivable, time, savings account, savings account or similar account held with a bank. Unlike most types of collateral, filing a UCC-1 financing statement does not perfect a pledge right on a current account. A lender can only perfect a right of pledge on a current account by taking ”control” of the account. For an insured lender, cash is often the most critical security. Borrowers usually hold cash in deposit accounts with a bank. Therefore, a lender will want to get a perfected security interest for these deposit accounts in order to have a perfected security interest for that cash. Deposit – United States An account to which a financial asset is or may be credited under an agreement, under which the primary financial institution undertakes to treat the person for whom the account is held as a beneficiary. . Dictionary of Law The debtor shall make available to the secured party a current account control agreement, duly entered into in the name of any financial institution holding a current account of the debtor in accordance with this security agreement. The lender should receive a DACA from any third-party bank with which the borrower has a checking account. A custodian bank that signs a DACA agrees to follow the lender`s instructions regarding cash paid by the borrower without further action or agreement from the borrower. Such an agreement gives the lender the ”control” of the current account necessary for perfection after the INVESTIGATION PERIOD.
Account Control Agreement – An agreement that allows a creditor to perfect a creditor`s interest in a deposit and allow securities to remain registered in the owner`s name. An account control agreement is used to justify a security interest which is the. . Financial and business conditions Each custodian bank often has its own form of DACA, although the above elements are common to each form. AACs are discussed and negotiated. Therefore, borrowers and lenders should realize that it may take some time before a DACA is agreed and signed by all parties for the lender to benefit from an advanced security interest for a deposit account. A lender may establish ”control” in one of the following ways: (i) the borrower maintains his or her deposit account directly with the lender; 2. the lender becomes the beneficial owner of the borrower`s deposit accounts with the borrower`s custodian banks; or (3) the lender and borrower enter into a deposit account control agreement (known as DACA) with the borrower`s custodian bank.