Also known as: perfection by control · perfect by control · perfected by possession · control perfection
Written by attorneys · grounded in primary & secondary sources — see below
A method of perfecting a security interest in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, or letter-of-credit rights. The secured party obtains control under the designated statutory sections. For controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, or letter-of-credit rights the interest remains perfected only while the secured party retains control.
Riverbend Community Bank lends to Sunrise Arts Foundation and takes a security interest in the foundation's donations deposit account maintained at the bank. Riverbend takes no financing statement. When Sunrise later defaults on obligations to both Riverbend and a later-filing lender, Riverbend's automatic control perfects its interest and gives it priority in the account funds.
Noon Restaurant maintains Highland Dining's deposit account and obtains an authenticated control agreement. When Highland defaults, Noon retains control and holds a perfected interest. If Noon later relinquishes the agreement and allows Highland to direct the funds freely, the security interest becomes unperfected.
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Control perfects security interests in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, and letter-of-credit rights.
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The interest remains perfected only while the secured party retains control. Loss of control causes the interest to become unperfected.
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No. Filing is ineffective to perfect an interest in a deposit account taken as original collateral. Control is the exclusive method.
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A bank automatically has control of a deposit account it maintains once it takes a security interest in that account.
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Security interests perfected by control rank according to the time each secured party obtained control.
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