Commercial Code section 9340

(a)

Except as otherwise provided in subdivision (c), 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.

(b)

Except as otherwise provided in subdivision (c), the application of this division 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.

(c)

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 which is perfected by control under paragraph (3) of subdivision (a) of Section 9104, if the setoff is based on a claim against the debtor.

Source: Section 9340, https://leginfo.­legislature.­ca.­gov/faces/codes_displaySection.­xhtml?lawCode=COM§ionNum=9340.­ (accessed Jun. 2, 2025).

Last Updated

May 12, 2025

§ 9340’s source at ca​.gov