RIGHTS OF BANK

§9-1340.__Effectiveness of right of recoupment or setoff against

deposit account

(1)__Except as otherwise provided in subsection (3), a bank with which a deposit account is maintained may exercise any right of recoupment or setoff against a secured party that holds a security interest in the deposit account.

(2)__Except as otherwise provided in subsection (3), the application of this Article to a security interest in a deposit account does not affect a right of recoupment or setoff of the secured party as to a deposit account maintained with the secured party.

(3)__The exercise by a bank of a setoff against a deposit account is ineffective against a secured party that holds a security interest in the deposit account that is perfected by control under section 9-1104, subsection (1), paragraph (c), if the setoff is based on a claim against the debtor.

Official Comment

1. Source. New; subsection (b) [Maine cite subsection (2)] is based on a nonuniform Illinois amendment.

2. Setoff vs. Security Interest. This section resolves the conflict between a security interest in a deposit account and the bank's rights of recoupment and setoff.

Subsection (a) [Maine cite subsection (1)] states the general rule and provides that the bank may effectively exercise rights of recoupment and setoff against the secured party. Subsection (c) [Maine cite subsection (3)] contains an exception: if the secured party has control under Section 9-104(a)(3) [Maine cite section 9-1104, subsection (1), paragraph (c)] (i.e., if it has become the bank's customer), then any setoff exercised by the bank against a debt owed by the debtor (as opposed to a debt owed to the bank by the secured party) is ineffective. The bank may, however, exercise its recoupment rights effectively. This result is consistent with the priority rule in Section 9-327(4) [Maine cite section 9-1327, subsection (4)], under which the security interest of a bank in a deposit account is subordinate to that of a secured party who has control under Section 9-104(a)(3) [Maine cite section 9-1104, subsection (1), paragraph (c)].