Advanced Security Interest – Once the DACA is executed, the secured party will be granted an advanced collateral right which, in accordance with the Single Commercial Code, gives it the exclusive right to control the debtor`s current account. For an insured lender, cash is often the most critical security. Borrowers usually hold cash in deposit accounts with a bank. Therefore, a lender will want to get a perfected security interest for these deposit accounts in order to have a perfected security interest for that cash. Deposit Account Control Agreement (DACA) – A tripartite agreement between a customer (debtor), a secured party (lender) and a bank allowing the lender to perfect a security interest in the customer`s funds by taking control of the current account (UCC § 9-104). The first step a custodian bank needs to take to protect itself is to start with a good DACA form. DACA forms made available to a deposit-taking institution by a lender are not prepared taking into account the unique operational, business and legal needs of the deposit-taking institution. And it is very likely that they will contain provisions that are more favorable to lenders than the market in the sector. By creating and emphasizing the use of its own DACA form, a deposit-taking institution can be confident that its unique operational needs will be taken into account, including notification information and the time required to implement other parties` instructions. In addition, individuals who implement CADs with the deposit-taking institution are better acquainted with the deposit-taking institution`s obligations under DACA by consistently using their own form, which reduces the likelihood of there being an error or oversight in the implementation. Often, those responsible for implementing AACs are not familiar with the verification and interpretation of agreements. Therefore, an unknown DACA form will be difficult to interpret to understand all of the custodian bank`s obligations. If the deposit bank form is used consistently, any lawyer who negotiates a DACA for the deposit-take-off institution can point out changes to the DACA that may affect the deposit-take-off institution`s obligations.
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