A deposit account control agreement, or DACA, is a legal agreement that provides a lender with control over a borrower`s deposit account. This agreement is important because it ensures that the lender receives payment on a loan, even if the borrower defaults.
The DACA summarizes the terms and conditions that govern the lender’s control over the deposit account. It outlines the rights and responsibilities of both parties, as well as the procedures that will be followed if there is a dispute.
One of the most important provisions in a DACA is the lender`s right to direct the bank to freeze, close, or transfer funds from the borrower`s account. This allows the lender to secure payment on the loan by accessing the funds in the deposit account.
Another important provision in a DACA is the borrower`s obligation to maintain sufficient funds in the account to cover any outstanding balance on the loan. Failure to maintain adequate funds may be considered a default on the loan, which can result in significant penalties and legal action.
The DACA also specifies the circumstances under which the lender may release its control over the borrower`s deposit account. Typically, this occurs once the borrower has repaid the loan in full, or when the lender agrees to release its control in writing.
Overall, a deposit account control agreement is an essential tool for lenders to ensure that they receive payment on their loans. By understanding the terms and conditions outlined in the DACA, borrowers can ensure that they are meeting their obligations and avoiding any potential penalties or legal action.