Assigning Lender Controls for a SecureClose Vault
Definitions you need to know:
Control– “control”, works to perfect an interest in collateral held by a third party by agreement for the benefit of the lender. Article 9 of the Uniform Commercial Code permits perfection of a security interest by control for electronic chattel paper.
Vault deposits of Chattel paper— the only way to perfect a security interest in a deposit account is by obtaining control of the depository vault account. A secured party has control of a vault account if the depository account is in the secured party’s name. Additionally, a secured party has control if the depository custodian agrees with the secured party that they will comply with the instructions from the secured party concerning the account, without allowing for consent by the account vault Licensee/ Borrower.
All the requirements for UCC filing to perfect LENDER’s interest in the chattel paper exist in the SecureClose system once LENDER becomes the administrator of a vault within the Secureclose ecosystem if control is assigned by the Licensee (Borrower or Dealer) to the Lender via a Control Agreement
A single authoritative watermarked original of record of the chattel paper, not a copy, which is unique and identifiable by the watermark, exists in the SecureClose administrative portal and can be accessed by LENDER once the deposit account is set up.
If the LENDER wants the authoritative original removed from the SecureClose vault and into its own secured site outside of SecureClose, it can be downloaded by LENDER and placed in a secured site of their designation. When the authoritative original chattel paper is downloaded, a copy is created simultaneously and watermarked ‘COPY’ in the SecureClose admin portal for the Borrower/Dealer. However, the authoritative original cannot be accessed at any point in the future, because it no longer exists in the SecureClose ecosystem, the SecureClose system indicates that the original was already downloaded and can no longer be accessed.
When this action is taken, the original no longer exists in the SecureClose Vault and cannot be produced again. It will only exist in the LENDER’s possession if it is downloaded. In this scenario, the only way for BORROWER to access the original in the future, would be for LENDER to send BORROWER the original file directly. It is not recommended that the LENDER download the authoritative original out of the SecureClose vault, Secureclose will not be able to verify the integrity once the original is removed from its controlled environment.
It is recommended that the BORROWER grant LENDER assigned administrative rights to its deposit account within the SecureClose Vault in order for SecureClose to maintain and verify the integrity of the authoritative original. Once this is done, the LENDER can assign the BORROWER rights to the deposit account within SecureClose once the agreement has terminated.
The authoritative copy identifies the secured party as the assignee of the record or records;
There is an “Assignment Box” on the authoritative original of the chattel paper or Retail Installment Sales Contract that assigns the instrument to BORROWER. The Credit Agreement between LENDER and BORROWER automatically assigns all BORROWER chattel paper to LENDER and the LENDER has the only access to the authoritative original. The authoritative copy is communicated to and maintained by the secured party or its designated custodian-SecureClose, LLC.
Once LENDER is given Administrative rights to the authoritative original, BORROWER has no access to it. BORROWER will only have access to copies through Secureclose admin portal once LENDER is assigned as an administrator.
Any amendments done to an existing account would create a new authoritative original chattel paper that only LENDER would possess.
Each copy of the documents is clearly identified as a “COPY” that is not the authoritative Original and can only be accessed if Lender gives rights to a user within their vault, or sends a watermarked “COPY” to the Borrower for its records.
