Article 9 of the Single Code of Trade (UCC) defines a deposit account as a claim, time, savings, passport or similar account held in a bank. Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only perfect a pledge right to an account by obtaining “control” over the account. It is important to note when we talk about DACA, which means it can be two types, one is a “blocked” control agreement that gives the lender full rights to the borrower`s deposit funds and prohibits the borrower from accessing the funds. The other is “Springing,” which allows the borrower to access his (s) deposit (s) until there is a default situation, and the lender provides exclusive notice of control to the custodian bank. Both DACA forms must be complied with. For a secure lender, cash is often the most critical piece of security. Borrowers hold cash deposit accounts in a bank. Thus, a lender will want to obtain a sophisticated security interest for these deposit accounts in order to have an advanced security interest in this cash. A custodian institution that gives up a DACA is faced with significant obligations, both to the guaranteed party and to its deposit client. When a deposit-making institution fails to meet its obligations, this may reduce the value of the lender`s deposit guarantee funds. If the rights and obligations of all parties to the DACA are not clearly defined or if changes to the DACA change the standard implementation process of a deposit-taking institution, a deposit-taking institution may inadvertently take action that could also reduce the value of the lender`s deposit guarantee amount.
It is therefore essential that a deposit-taking institution carefully assess whether there are gaps in its own DACA verification and implementation process. An admission by the custodian bank that DACA must certify the lender`s “control”; A statement from the deposit-making bank that the accounts concerned are “deposit accounts”; An agreement by the deposit-taking bank not to change the name or number of the deposit account without the lender`s written consent; An agreement between the deposit bank and the borrower to notify the lender before the closing of the deposit accounts and allow the lender to adopt a new DACA for all deposit accounts in which the borrower could defer cash security; and – An agreement of the deposit bank to subordinate all the pledge fees it has to the account and waive its right of clearing on the deposit account, with the exception of the amount of deposits credited to the account that are not repaid and the ordinary service charges charged by the deposit bank. Active Deposit Account Control Agreement – A control agreement that orders the bank to accept the instructions of the secured party (not the debtor). A lender can establish “control” in one of the following ways: (i) the borrower holds his deposit account directly with the lender; 2. The lender becomes the effective 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 deposit bank.