What is a security interest in deposit accounts?

A security interest in deposit accounts refers specifically to an interest in a bank account that is held by the debtor. This means that when a creditor takes a security interest in a deposit account, they are securing their interest in the funds that are available in that account, which may be used to satisfy the debtor’s obligations.

This is significant because deposit accounts are categorized under the Uniform Commercial Code (UCC) as types of collateral where a security interest can arise. The creditor must perfect this security interest, typically by taking control of the deposit account, ensuring that they have a priority claim over the funds if the debtor defaults. The nature of a deposit account as a liquid asset makes it an attractive form of collateral for lenders.

In contrast, other options like interests in commercial property, inventory assets, or cash collateral represent different categories of collateral covered under UCC but do not define a security interest specifically tied to a bank account. Each type of collateral might come with different rights, methods of perfection, and nuances regarding enforcement, which is why the deposit account is a distinct focus when discussing security interests.