When Revised Article 9 of the Uniform Commercial Code became effective in most states, it included within its scope deposit accounts. To create a security interest in deposit accounts, a lender must establish control.
One of the methods for establishing control is for the lender to enter into a Control Agreement with the depositary bank and the borrower. Under the revised code, such a relationship does not trump the set-off rights of the depositary bank. Under the text of Revised Article 9, the only way to trump the set-off right of a depositary bank is for the lending institution to actually become a customer of the deposit account.
Author: Lori Young (bio)
Phone: 812.452.3560
email: lyoung@bamberger.com