Perfection of a Security Interest by Control - Explained
Control of Collateral as a Method of Perfection
Written by Jason Gordon
Updated at September 26th, 2021
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Table of Contents
How does one perfect a security interest by control of the collateral?Discussion QuestionPractice QuestionAcademic ResearchHow does one perfect a security interest by control of the collateral?
Article 9 allows for perfection of a security interest in certain types of collateral by control. These types of assets include deposit accounts, investment properties, letter-of-credit rights, and electronic chattel paper. Control is related to possession and is generally established by a control agreement granting the secured party control over the account or naming the party as owning the account. The authority that the secured party has over the collateral equates to possession.
- Relevant Law: 9-104 thru 107. These types of assets include deposit accounts, investment properties, letter-of-credit rights, or electronic chattel paper. 9-314. Control of a deposit account is held by the financial institution ( 9-104(a)(1)), by a control agreement naming the secured party to control over the account ( 9-104(a)(2)), or as a named party owning the account ( 9-104(a)(3)).
Next Article: Perfection of a Security Interest by Filing a Financing Statement Back to: SECURED TRANSACTIONS
Related Topics
- Perfection of a security interest?
- Perfecting a security interest in personal property?
- UCC-1 Statement
- Security interest in real property (land)?
- Register of Deeds
- Automatic Perfection of a security interest?
- Purchase Money Security Interest (PMSI) in consumer goods?
- Purchase Money Grace Period for a PMSI in non-consumer goods?
- Continue perfection of a PMSI in non-consumer goods?
- Temporary Automatic Perfection in Proceeds from the sale of goods?
- How is a security interest created in Assignment of Accounts Receivable and Contract Rights?
- Perfect a security interest by Possession of the collateral?
- Perfect a security interest by Control of collateral?
- Perfect a security interest by Filing a Financing Statement?
- Authorization is required to file a financing statement?
- Where to file a financing statement?
- Defeasance
- Continuation Statement
Discussion Question
Why do you think it is important to allow perfection of a security interest in certain types of collateral by exercising control over the collateral (in the absence of possession)?
Practice Question
First Bank is a local consumer bank. Gladys is a customer of the bank and has both checking and savings accounts. She needs money, so she goes to the bank and takes out a loan. The bank requires that Gladys sign an agreement granting the bank control over the savings account, which will serve as collateral for the loan. Does the bank have a perfected security interest?