Bank Account Control Agreement Template for the United States

A Bank Account Control Agreement is a three-party contract between an account bank, a secured party (typically a lender), and an account holder (borrower) that establishes legal control over deposit accounts to secure debt obligations. Under United States law, this document is essential for lenders who want to use deposit accounts as collateral, as it provides the "control" required under UCC Article 9 to perfect a security interest in deposit accounts.

When do you need this document?

You need a Bank Account Control Agreement whenever a lender requires deposit accounts as collateral for a loan or credit facility. This commonly occurs in asset-based lending, where businesses pledge their bank accounts alongside other assets to secure financing. Equipment financing companies use these agreements when lending against business cash flows, while commercial real estate lenders often require them for rental income accounts. Private equity transactions frequently involve these agreements to control target company bank accounts during leveraged buyouts. Additionally, factoring companies use them to control accounts receivable collection accounts, ensuring loan repayment from customer payments.

Key legal considerations

The agreement must clearly establish which party has "control" under UCC § 9-104, as this determines priority over other creditors and perfection of the security interest. The document should specify trigger events that activate the secured party's control rights, such as payment defaults or covenant breaches. Bank duties and limitations must be carefully defined to protect the institution from conflicting instructions and liability exposure. The agreement should address permitted account activities during normal operations versus restricted activities during control periods. Termination provisions are crucial for releasing control when loans are repaid or refinanced. Consider including provisions for account sweeps, blocked account arrangements, and notification requirements to ensure all parties understand their rights and obligations.

Legal requirements in United States

Under UCC Article 9, control is achieved when the bank agrees to comply with instructions from the secured party without further consent from the account holder. Federal banking regulations under 12 CFR may impose additional requirements on banks participating in these arrangements, particularly regarding customer identification and anti-money laundering compliance under the Bank Secrecy Act and USA PATRIOT Act. State banking laws may also affect enforceability, so review applicable state regulations where the bank operates. The agreement must comply with FDIC regulations if the bank is FDIC-insured, and should address deposit insurance implications. Documentation requirements vary by state, but the agreement typically must be in writing and signed by all parties to be enforceable under state contract law and UCC provisions.