§ 10:9-207 — Rights and duties of secured party having possession or control of collateral

§9-207. Rights and duties of secured party having possession or control of collateral
(a) Duty of care when secured party in possession. Except as otherwise provided in
Subsection (d), a secured party shall use reasonable care in the custody and preservation of
collateral in the secured party's possession. In the case of chattel paper or an instrument,
reasonable care includes taking necessary steps to preserve rights against prior parties unless
otherwise agreed.
(b) Expenses, risks, duties, and rights when secured party in possession. Except as
otherwise provided in Subsection (d), if a secured party has possession of collateral:
(1) reasonable expenses, including the cost of insurance and payment of taxes or
other charges, incurred in the custody, preservation, use, or operation of the collateral are
chargeable to the debtor and are secured by the collateral;
(2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency
in any effective insurance coverage;
(3) the secured party shall keep the collateral identifiable, but fungible collateral may
be commingled; and
(4) the secured party may use or operate the collateral:
(A) for the purpose of preserving the collateral or its value;
(B) as permitted by an order of a court having competent jurisdiction; or
(C) except in the case of consumer goods, in the manner and to the extent agreed by
the debtor.
(c) Duties and rights when secured party in possession or control. Unless otherwise
agreed by the parties and except as otherwise provided in Subsection (d) of this Section, a
secured party having possession of collateral or control of collateral under R.S. 10:7-106,
9-104, 9-105, 9-106, 9-107, 9-107.1, or 9-107.3:
(1) may hold as additional security any proceeds, except money or funds, received
from the collateral;
(2) shall apply money or funds received from the collateral to reduce the secured
obligation, unless remitted to the debtor; and
(3) may create a security interest in the collateral subject to and on terms that do not
impair the debtor's right to redeem it.
(d) Buyer of certain rights to payment. If the secured party is a buyer of accounts,
chattel paper, payment intangibles, or promissory notes or is a consignor:
(1) Subsection (a) does not apply unless the secured party is entitled under an
agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against the debtor or a secondary obligor
based on the nonpayment or other default of an account debtor or other obligor on the
collateral; and
(2) Subsections (b) and (c) do not apply.

Legislative History

Acts 1988, No. 528, §1, eff. Jan. 1, 1990; Acts 1989, No. 135, §7, eff. Jan. 1, 1990; Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 2001, No. 128, §1, eff. July 1, 2001; Acts 2009, No. 207, §5, eff. Jan. 1, 2010; Acts 2024, No. 773, §1.