Also known as: deposit account
Written by attorneys · grounded in primary & secondary sources — see below
Bank accounts, including checking and savings accounts, that constitute a distinct category of collateral under Article 9 of the Uniform Commercial Code. A security interest in a deposit account may be perfected only by control and remains perfected only while control is retained.
Dixon Foods borrowed from First Bank and granted a security interest in its operating deposit account. First Bank obtained a signed control agreement with the depository bank giving it the right to direct dispositions. Because control was achieved under the governing rule, First Bank's security interest became perfected in the deposit account.
Deanna Davenport granted a security interest in her business deposit account to a lender. The lender became a customer on the account with the right to order withdrawals. The lender thereby obtained control and perfected its security interest in the deposit account.
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Duffy Construction granted a security interest in its deposit account to a lender that obtained control through a control agreement. When the lender later released its instructions to the bank, it lost control. The security interest ceased to be perfected once control ended.
A security interest in a deposit account is perfected only by control under the applicable UCC sections. Filing a financing statement does not perfect an interest in a deposit account. The secured party must satisfy one of the statutory methods for obtaining control.
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Perfection by control begins when the secured party obtains control. Perfection continues only while the secured party retains control. Loss of control causes the security interest to become unperfected.
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Yes. The bank maintaining the deposit account obtains control by virtue of its status as the depository bank. This form of control exists even if the debtor retains the right to direct dispositions from the account.
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