Deposit Account Control Agreement (DACA) Perfection Risk
The Formal Definition
A tri-party legal agreement among a corporate borrower, a secured lender, and a depository bank that establishes the lender's perfected security interest over a cash deposit account under UCC Article 9, granting the lender unilateral legal control to freeze and sweep cash upon default.
Legal Control Status = Perfected UCC Article 9 Security Interest ≡ DACA Executed by Depository Bank
Cole Barrett's Reality Check
The Unvarnished Bottom Line"A DACA is a legal switch on your bank account. In calm times, it sits as a 'springing' agreement: you run your business and move money normally. But if you breach a single loan covenant, the lender sends a 'Notice of Exclusive Control' to the bank. In seconds, your debit cards stop working, your wires freeze, and the lender sweeps your operating cash to pay down their loan."
Interactive Simulator: Test the Math
Real-World Example: Scenario Breakdown
Examining the real numbers for: A commercial borrower with $5,000,000 in cash deposits facing a covenant breach on a secured credit facility
| Execution Metric | Multi-Bank Operating Structure | Blanket DACA Borrower |
|---|---|---|
| Fee / Rate | $0 account fees | $1,500 legal documentation fee |
| Spread / Buffer | Negotiated loan terms that restricted DACA coverage strictly to a dedicated $1,000,000 debt-service reserve account | Signed a blanket Springing DACA covering 100% of the company's operating and deposit accounts |
| Execution / Status | Kept operational payroll and supplier cash accounts unencumbered at an independent commercial bank | Company tripped a technical interest coverage covenant; lender sent an emergency Notice of Exclusive Control |
| Total Cost / Result | Preserved operational business continuity through targeted DACA structuring | Operations crippled by blanket DACA cash seizure |
How Brokers Weaponize This Term
When reviewing corporate loan agreements or investing in private debt, examine the DACA scope. Blanket DACAs covering all operating accounts allow lenders to seize corporate liquidity during minor technical defaults, forcing equity wipeouts.
Broker Evaluation Matrix
Cole Approves
Charles Schwab: Provides institutional custodial and commercial cash management accounts that support transparent, structured DACA integrations for corporate clients.
Read Audit →Cole Flags / Avoids
Regional Private Banks: Enforces aggressive blanket DACA covenants on corporate accounts that allow unilateral cash freezes on minor reporting delays.
View Trap Details →Frequently Asked Questions
What is the difference between a 'Springing' DACA and an 'Active' DACA?
A Springing DACA allows the borrower to access and move cash freely until the lender issues a formal default notice. An Active DACA gives the lender total control over all withdrawals and transfers from day one.
Can a borrower cancel a DACA?
No. A DACA can only be modified or terminated with the explicit, written consent of the secured lender.