17 Dic Springing Account Control Agreement
The lender should obtain a DACA from each third-party bank from which the borrower has a deposit account. A deposit bank that signs a DACA agrees to follow the lender`s instructions regarding the borrower`s money paid, without the borrower taking further action or the borrower`s agreement. Such an agreement gives the lender “control” of the deposit account required for perfection under the UCC. In the case of a leaping DACA, the lender would prefer that the custodian bank receive notification of the exclusive control and instructions of the lender, the custodian bank will execute it immediately. However, the deposit bank often needs a few days between receiving such notification and implementing the lender`s instructions. Typically, a jumping DACA also contains a form of exposure that the lender must use to notify the deposit bank of an event requiring a deed under DACA. Regions have a centralized and experienced account control team that can offer a number of benefits to lenders and clients as well as their law firms. First, there are two types of account control agreements: assets and liabilities. UCC No. 9-104 — The “Single Code of Trade” section that deals with deposit account control.
This section enhances the security interests on deposit accounts as an original guarantee. Why do lenders use account management agreements? Clients often do not host their deposits with their lenders and some lenders do not offer deposit accounts. Lenders enter into deposit account control agreements such as an additional level of default protection and loan repayment assistance. Debtor (client) – As one of the three parts of the DACA, the debtor provides the security and receives the deposits into the deposit account. Advanced Security Interests – During the execution of the DACA, the insured party will be granted an advanced security interest that granted it, under the Single Code of Commerce, exclusive rights to control the debtor`s deposit account. 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. The Uniform Trade Code (UCC) defines a deposit account as a need, time, savings, passbook or similar account managed by a bank. This excludes investment real estate or accounts submitted by an instrument.
Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only upgrade a pledge to a borrower`s deposit account by obtaining “control” of the account, which requires one of the following provisions: 1) the borrower keeps 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 parties receive a deposit account control contract (DACA) with the borrower`s deposit bank. Alternative (3) is often the only viable option. This would be in addition to the guarantee agreement by which the borrower would grant the lender its cash deposit accounts as collateral for the loan. Active Deposit Account Control Agreement – A control agreement that orders the bank to accept the instructions of the secured party (not the debtor). 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; An agreement from the custodian bank to subordinate all droi