What does 'control' mean in the context of perfection for certain collateral, and which assets commonly require it?

• A. Control means the debtor can still access the collateral at any time.
• B. Control means the secured party has exclusive authority to enforce or dispose of the collateral without the debtor's involvement; it is required for assets like electronic chattel paper and certain deposit accounts.
• C. Control means the creditor may file any documents on behalf of the debtor.
• D. Control refers to the ability to transfer ownership without consent.

Answer: (B)

Control in perfection means the secured party has exclusive power to enforce or dispose of the collateral without involvement from the debtor. This is what makes perfection reliable for certain types of assets where simply filing a lien isn’t enough to secure rights against third parties.

For electronic chattel paper, perfection by control is required because the asset exists as an electronic record. The secured party must have exclusive authority over the electronic record so that the debtor cannot unilaterally redirect or negate the secured party’s rights. This is achieved by obtaining control over the electronic document.

For deposit accounts, control is also necessary. A control agreement with the bank ensures the secured party can direct payments or freeze funds even if the debtor tries to access the account, giving the secured party the enforceable right to the funds without the debtor’s cooperation.

So, the best description is that control is the exclusive authority to enforce or dispose of the collateral without the debtor’s involvement, and it is commonly required for assets like electronic chattel paper and certain deposit accounts.