Instructions – An instruction to the bank that manages the sale of funds in the account. The lender should consider that the borrower retains a minimum balance on the account or accounts under the lender`s control and limits the borrower`s ability to open other deposit accounts that are not subject to the lender`s control. The lender should also monitor balances on the borrower`s deposit accounts. In a spring control agreement, a borrower if necessary could withdraw money from the deposit account before the lender could pass on its notice of control of the suspensions to the custodian bank. Deposit Account Control Agreement (DACA) – A tripartite agreement between a client (debtor), an insured party (lender) and a bank that allows the lender to enhance a security interest in the client`s funds by taking control of the deposit account (UCC No. 9-104). A deposit account control agreement (DACA), also known as a control agreement, is a tripartite agreement between a deposit client (the debtor), a client`s lender (the guaranteed party) and a bank. During the due diligence process, the lender should request information about the custodian banks where the borrower`s deposit accounts are held, the purpose of each account and the amount of cash the borrower holds in each account. The Uniform Trade Code (UCC) defines a deposit account as a need, time, savings, passbook or similar account managed by a bank. This excludes investment real estate or accounts submitted by an instrument. Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only upgrade a pledge to a borrower`s deposit account by obtaining “control” of the account, which requires one of the following provisions: 1) the borrower keeps 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 parties receive a deposit account control contract (DACA) with the borrower`s deposit bank.
Alternative (3) is often the only viable option. This would be in addition to the guarantee agreement by which the borrower would grant the lender its cash deposit accounts as collateral for the loan. 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.