The purpose of this guide is to provide clients with information on how Deposit Account Control Agreements (“DACAs”) are handled on the Unit platform.
A DACA is a legal agreement entered into by an end-customer, a secured party (the party with the right to enforce the DACA), a client (if not the secured party), and a bank partner. A DACA provides the secured party with the following rights:
- to restrict access to the end-user’s deposit account
- to provide instructions to the bank regarding the account and the funds in the account
By entering into a DACA, a bank typically agrees to restrict access to the bank account and related funds of an end-customer when requested by the secured party and to follow the instructions of the secured party regarding the account. In some cases, a secured party might authorize a third party as an agent to provide instructions to the bank on the secured party’s behalf.
For example, a lender may sign a DACA with a borrower stating that, if the borrower doesn’t make required loan repayments, the lender gains control of the bank account and the funds in it.
DACAs can be used for a variety of purposes. Most often, they’re used by one party to perfect a security interest in the deposit account and related funds of an end-customer in connection with a separate commercial relationship, such as a loan or other financing agreement, between the secured party and the end-customer. “Perfecting” a security interest means taking legal steps to ensure that a given asset or assets cannot be claimed by another party.
The DACA functionality on the Unit platform is disabled by default. Please contact your Success Manager to enable this functionality.
Prior to enabling DACA functionality, Unit and your bank partner must approve the legal form of and proposed use case for the DACA. As further explained in the docs, there are three DACA-related actions enabled by the Unit platform via three different API endpoints:
Each of these will be described below. You are responsible for all DACA-related instructions you provide to Unit and your bank partner, including all instructions provided via API.
Once the legal form and use case for a DACA have been approved by Unit and your bank partner, you can provide notice to Unit that a DACA has been entered into on an account using the DACA entered API endpoint. This will put the account in “Entered” status.
Unit and your bank partner require copies of all DACAs that are entered into. Your Success Manager can provide you with information about how to transmit copies of DACAs to Unit and what form of end-user consent the bank will require before agreeing to enter into the DACAs.
On its own, entering into a DACA does not give the secured party the ability to restrict access to or provide instructions regarding the applicable deposit account. The secured party must exercise its rights under a DACA by notifying Unit and your bank partner that it is taking such actions.
A client can provide notice to Unit that the secured party is exercising these rights using the DACA activate API endpoint. Only accounts that are already subject to a DACA through the “DACA entered” API endpoint can activate a DACA via API.
Activating a DACA will freeze all of the account’s debit cards and will result in all incoming ACH payments being returned. This is to ensure that money is not leaving an account with an activated DACA without the consent of the secured party. Clients are able to add additional restrictions on accounts subject to a DACA, such as limiting which actions end-users can take on such accounts, via API.
In some cases, a secured party may wish to activate the DACA at the opening of the deposit account. In other cases, activation of the DACA may be triggered by another event, such as a default by the end user in its commercial relationship with the secured party, such as if a borrower defaults on its loan with a lender.
While a DACA is activated, Unit and your bank partner will comply with any and all valid instructions from the secured party or client on behalf of the secured party. These instructions can be received via API or any other communications channel agreed on in the DACA.
A client can provide notice to Unit that a secured party has ceased to exercise its rights over a deposit account using the DACA deactivate API endoint. Using this endpoint will:
- return the account to Entered status
- unfreeze all debit cards
- remove the limitations on incoming ACH payments
Clients are responsible for removing any other limitations that they placed on accounts when those accounts were subject to an activated DACA.