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Deposit Account Control Agreement What Is

The lender should receive a DACA from any third-party bank with which the borrower has a checking account. A custodian bank that signs a DACA agrees to follow the lender`s instructions regarding cash paid by the borrower without further action or agreement from the borrower. Such an agreement gives the lender the “control” of the current account necessary for perfection after the INVESTIGATION PERIOD. A Deposit Account Control Agreement (DACA), also known as a Control Agreement, is a tripartite agreement between a deposit customer (the debtor), a deposit customer`s lender (the secured party) and a bank. Deposit account control agreements (CAAs) are too often little taken into account by a deposit-taking institution that signs them. It is all too common for a deposit-taking institution to lack appropriate controls, including the appointment of legal counsel, if any, to protect the deposit-taking institution`s interests when signing and implementing an ACA. This is in stark contrast to lenders who typically commission a consultant to carefully review and process DACA to ensure that the lender`s security interests in deposit accounts are refined and that the DACA commitment is transferred to the deposit-taking institution. The result is that a deposit-taking institution may expose itself to a significantly higher number of risks than necessary when closing CADs. Even if a deposit-taking institution needs its own DACA form, custodian banks should always be attentive to changes made by a lender or borrower and their advisor before signing the DACA form. Often, other parties to DACA will endeavor to substantially change important provisions relating to the protection of the deposit-making institution, including the rules on indemnification, deposit, and termination. Custodian banks should have the proposed amendments reviewed by a lawyer who is familiar with trading CADs from the perspective of a custodian institution (for example, includes banking, cash management and deposit operations, as well as the importance of certain legal protection provisions for the depositary institution). .

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