Perfection of a Security Interest by Control
Control of Collateral as a Method of Perfection
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
Table of ContentsHow does one perfect a security interest by control of the collateral?Discussion QuestionPractice QuestionAcademic Research
How 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
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)?
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?