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. 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. Active Deposit Account Control Agreement – A control agreement that orders the bank to accept the instructions of the secured party (not the debtor). 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.
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. The first instruction — An instruction given to the bank comes from the lender, which orders it to stop following the debtor`s instructions. The initial statement often contains a disposition order from the secure part, which allows the insured party to manage the flow of money from the deposit account. First, there are two types of account control agreements: assets and liabilities. Debtor (client) – As one of the three parts of the DACA, the debtor provides the security and receives the deposits into the deposit account. Each custodian bank often has its own form of DACA, although the above elements are common to each form. The DAC is the subject of discussions and negotiations. Therefore, borrowers and lenders should be aware that it may take some time before a DACA is agreed and signed by all parties, so that the lender can obtain a perfect security interest on a deposit account. There are two main forms of DACA, both of which are sufficient for control and perfection under the UCC.