Effectiveness of right of recoupment or set-off against

deposit account. (a) Except as otherwise provided in Subsection (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 Subsection (c) of this section, the application of Chapter 55, Article 9 NMSA 1978 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 which is perfected by control under Paragraph (3) of Subsection (a) of Section 55-9-104 NMSA 1978, if the set-off is based on a claim against the debtor. History: 1978 Comp., § 55-9-340, enacted by Laws 2001, ch. 139, § 60. OFFICIAL COMMENTS UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved. 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."