What is a Deposit Account Control Agreement?

A deposit account control agreement (DACA), also called a control agreement, is a tri-party agreement among a deposit customer (the debtor), a deposit customer’s lender (the secured party) and a bank.

Establishing a deposit account control agreement allows lenders to perfect their interest in a debtor’s deposit account(s) (UCC § 9-104) and define who can initiate disposition (transfer) instructions to the bank with respect to the controlled deposit account(s).

Primarily, there are two types of deposit account control agreements: active and passive.

• Active DACA: If, for example, lenders want the bank to only take disposition instructions from them, they will use an active deposit account control agreement (also called a “blocked DACA”). Upon execution of an active DACA, the bank only accepts disposition instructions from the lender, without further consent from the debtor.
• Passive DACA: The more common approach, however, is for the lender to set up a passive deposit account control agreement (also called a “springing DACA”). In this type of DACA structure, the bank initially takes disposition instruction from the deposit customer. Passive DACAs include an exhibit, called an initial instruction, that allows the lender to provide the bank with notice to stop complying with the debtor’s account instructions in the event the depositor’s loan defaults. By executing the initial instruction, the lender converts the deposit account control agreement from passive to active.

Why do Lenders Use Deposit Account Control Agreements?
Often, customers do not house their deposits with their lenders, and some lenders do not offer deposit accounts. Lenders establish deposit account control agreements as an additional level of protection against default and to assist with repayment of their loans.  

What are the Benefits of Setting Up a DACA with Regions?

Regions has an experienced, centralized deposit account control agreement team that can offer a range of benefits to lenders and customers, as well as their law firms.

Lender Benefits

• Team approach: The Regions centralized DACA business team collaborates with lenders to negotiate DACAs on a program basis
• Fast execution: The Regions DACA team is experienced in setting up DACA programs, which saves time and money — once the agreement is established, lenders can confidently execute a loan knowing that a customized DACA template already exists
• Single point of contact: The Regions deposit account control agreement business team provides lenders with a single, knowledgeable point of contact and elevated customer support

Customer Benefits

• Efficient process: The Regions business team focuses on making the execution of a DACA as easy as possible
• Tailored solution: Customizable agreements meet the specific needs of customers without requiring unnecessary tag-along products
• Access to other banking services: DACA customers can utilize the Regions suite of banking products and solutions

Law Firm Benefits

• Bolstered credibility: Customers will appreciate the long-term benefits of negotiating deposit account control agreements on a program basis with Regions
• Strengthened confidence: Regions uses the American Bar Association’s Model Deposit Account Control Agreement, which leverages best practices while allowing for customer customization

For more Regions DACA information:
Contact your Regions Treasury Management Officer or Relationship Manager, call the centralized DACA team at 1-877-453-DACA (1-877-453-3222) or email DACA@regions.com.

Deposit Account Control Agreement Terms to Know

Active Deposit Account Control Agreement — A control agreement that directs the bank to take disposition instructions from the secured party (not from the debtor).

Debtor (Customer) — One of three parties to the DACA, the debtor provides the collateral and receives the deposits in the deposit account.

Deposit Account Control Agreement (DACA) — A tri-party agreement among a customer (debtor), a secured party (lender) and a bank that allows the lender to perfect a security interest in the customer’s funds by taking control of the deposit account (UCC § 9-104). 

Disposition Instruction - An instruction to the bank directing the disposition of the funds in the deposit account.

Initial Instruction — An instruction to the bank originated by the lender, directing it to no longer comply with the debtor’s disposition instructions. The initial instruction often contains a disposition instruction originated by the secured party that allows the secured party to direct the flow of funds from the deposit account.

Passive Deposit Account Control Agreement — A control agreement that directs the bank to take disposition instructions from the debtor prior to the bank’s receipt of an initial instruction.

Perfected Security Interest — Upon execution of the DACA, a perfected security interest is granted to the secured party allowing it, under the Uniform Commercial Code, exclusive rights to control the debtor’s deposit account.

Secured Party (Lender) — Party to a DACA that is lending funds and receiving, upon execution of the agreement, a perfected security interest in the debtor’s deposit account.

UCC § 9-104 — The Uniform Commercial Code section dealing with the “Control of Deposit Account.”  This section allows for perfection of security interests in deposit accounts as original collateral.