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What is a Deposit Account Control Agreement?

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When businesses borrow funds, their lenders have options for protecting against the risks of extending credit. For lenders who accept collateral from a borrower, one way to manage risk is through a Deposit Account Control Agreement or DACA.

How do DACA accounts work?

A DACA account is typically a tri-party agreement between a bank, its customer (the borrower), and its customer’s secured creditor (the lender). 

The DACA serves to perfect a lender’s security interest in the funds in the borrower’s deposit accounts. With a tri-party DACA, a lender can disburse lent funds to an account of the bank that (unless as otherwise noted below) the borrower can use for its business operations.

Types of deposit account control agreements

There are two recognized kinds of DACAs: passive and active.

  • Passive DACAs, also called “springing” or “shifting” DACAs: Allow borrowers to use funds disbursed by the lender for its business operations In this situation, the lender does not direct how the funds in the joint account are used. If the borrower defaults on the loan, the lender can assume control over the account and instruct the bank to revoke the borrower’s ability to make transactions using funds in the account. 
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  • Active DACAs, or blocked account control agreements (BACA): Only the lender, not the borrower, can make transactions.

DACA account requirements 

All DACAs need to meet requirements under Article 9 of the Uniform Commercial Code (the UCC), the model statute governing secured transactions adopted in all 50 US States. In order to protect a creditor’s security interest in a deposit account, the creditor must establish “control” (a UCC term) of that account, meaning the bank will comply with the lender’s instructions without the borrower’s consent, without additional restrictions from third parties.

Banks often have their own standard DACA templates and the American Bar Association also released a model DACA. In both cases, the DACAs are designed to meet UCC requirements. 

Learn about how you can work with Modern Treasury under a DACA.

Modern Treasury is a payment operations platform built for the entire cycle of money movement. Our APIs and software applications directly integrate with your bank accounts, allowing you to process payments using ACH, RTP, Wires, and multiple other payment methods 2x faster than your existing solution. Modern Treasury automates payment reconciliation and accounting, giving you back time and control over your payment operations.

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Darien Carter
Written by:
Darien Carter
Last updated:
Feb 15, 2022
Last updated:
Feb 15, 2022

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Payment Operations

Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.

What is Money Transmission?

Money transmission is the act of one party receiving currency for the purpose of sending it over to another party.

Continuous Accounting

Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.

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