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. A Deposit Account Control Agreement (DACA), also known as a Control Agreement, is a tripartite agreement between a deposit customer (the debtor), a deposit customer`s lender (the secured party) and a bank. There are two main forms of ACTA, each sufficient for control and perfection within the PEA. A “frozen” control agreement provides that the borrower does not have access to funds in current accounts and that the lender has full control of the funds. The more common springing control agreement provides that the borrower can access current accounts until the lender provides the depositary bank with a notification of sole control. As a general rule, such termination can only be made by the lender if the borrower is late below the underlying credit. Once such notification has been made, the depositary bank must cease to comply with the borrower`s instructions regarding the current account(s) and to follow the lender`s instructions.
Typically, a DACA emerging as an exhibition involves some form of proprietary control communication. Secure Party (Lender) – part of a DACA that lends funds and receives an advanced security interest on the debtor`s checking account upon execution of the agreement. Active Deposit Account Control Agreement – A control agreement that has instructed the bank to receive disposition instructions from the secured party (not the debtor). 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. In any case, these agreements apply in addition to the hedging agreement by which the borrower grants a hedging interest for his current accounts. In the first place, there are two types of deposit account control agreements: assets and liabilities. The establishment of a deposit account control agreement allows lenders to perfect their interest in a debtor`s current accounts (UCC § 9-104) and to define who can introduce disposition instructions (transfer instructions) to the bank in respect of the controlled current account(s).
The first step a custodian bank needs to take to protect itself is to start with a good DACA form. . . .