What is perfection by control and for which types of collateral is it commonly used?

• A. Control means the secured party can enforce rights without possession; common for deposit accounts, electronic chattel paper, or letter-of-credit rights.
• B. It is never used for electronic assets.
• C. Control requires physical storage of collateral.
• D. It is the same as perfection by possession.

Answer: (C)

Perfection by control means the secured party has exclusive control over the collateral so they can enforce the security interest without taking possession. This approach fits assets that can be governed through a system or institution rather than by handing over the item physically. It is commonly used for deposit accounts, electronic chattel paper, and rights under a letter of credit. Because control is established through banking arrangements, electronic records, or the issuing bank’s framework, there’s no need for physical storage. This is different from perfection by possession, which requires physical custody of the collateral.