2006 Ohio Revised Code - 1309.340. (UCC 9-340) Effectiveness of right of recoupment or set-off against deposit account.

§ 1309.340. (UCC 9-340) Effectiveness of right of recoupment or set-off against deposit account.
 

(A)  Except as otherwise provided in division (C) of this section, a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account. 

(B)  Except as otherwise provided in division (C) of this section, the application of this chapter to a security interest in a deposit account does not affect a right of recoupment or set-off of the secured party as to a deposit account maintained with the secured party. 

(C)  The exercise by a bank of a set-off 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 division (A)(3) of section 1309.104 of the Revised Code, if the set-off is based on a claim against the debtor. 
 

HISTORY: 149 v S 74. Eff 7-1-2001.
 

The effective date is set by section 4 of SB 74. 

 

Official Comment

1. Source. New; subsection (b) is based on a nonuniform Illinois amendment. 

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

Subsection (a) states the general rule and provides that the bank may effectively exercise rights of recoupment and set-off against the secured party. Subsection (c) contains an exception: If the secured party has control under section 9-104(a)(3) (i.e., if it has become the bank's customer), then any set-off 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), 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). 

This section deals with rights of set-off and recoupment that a bank may have under other law. It does not create a right of set-off or recoupment, nor is it intended to override any limitations or restrictions that other law imposes on the exercise of those rights. 

3. Preservation of Set-Off Right. Subsection (b) makes clear that a bank may hold both a right of set-off against, and an article 9 security interest in, the same deposit account. By holding a security interest in a deposit account, a bank does not impair any right of set-off it would otherwise enjoy. This subsection does not pertain to accounts evidenced by an instrument (e.g., certain certificates of deposit), which are excluded from the definition of "deposit accounts."