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. These agreements apply in all cases in addition to the guarantee agreement by which the borrower grants a security interest on his deposit accounts. 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. 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 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. 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. There are two main forms of DACA, both of which are sufficient for control and perfection under the UCC. A „blocked“ control agreement provides that the borrower does not have access to the funds of the (s) account and that the lender has full control of the funds.