Section 409.207 - Rights and duties of secured party having possession or control of collateral(1) DUTY OF CARE WHEN SECURED PARTY IN POSSESSION. Except as otherwise provided in sub. (4), 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.(2) EXPENSES, RISKS, DUTIES, AND RIGHTS WHEN SECURED PARTY IN POSSESSION. Except as otherwise provided in sub. (4), if a secured party has possession of collateral: (a) 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;(b) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;(c) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and(d) The secured party may use or operate the collateral:1. For the purpose of preserving the collateral or its value;2. As permitted by an order of a court having competent jurisdiction; or3. Except in the case of consumer goods, in the manner and to the extent agreed by the debtor.(3) DUTIES AND RIGHTS WHEN SECURED PARTY IN POSSESSION OR CONTROL. Except as otherwise provided in sub. (4), a secured party having possession of collateral or control of collateral under s. 407.106 , 409.104 , 409.105 , 409.106 , or 409.107 : (a) May hold as additional security any proceeds, except money or funds, received from the collateral;(b) Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and(c) May create a security interest in the collateral.(4) BUYER OF CERTAIN RIGHTS TO PAYMENT. If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:(a) Subsection (1) does not apply unless the secured party is entitled under an agreement: 1. To charge back uncollected collateral; or2. 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(b) Subsections (1) and (2) do not apply.The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.207.
[Former] sub. (2) (c) does not require putting money held as security in an interest bearing account. That a bank had the beneficial use of money does not mean that interest was earned that must be applied under [former] sub. (2) (c). Demotropoulous v. Bank One Milwaukee, N.A. 953 F. Supp. 974 (1997). [Former] sub. (2) (c) requiring the application of increase or profits received by a secured property on property held as collateral did not apply to a security deposit paid on a car lease. Doe v. General Motors Acceptance Corporation, 2001 WI App 199, 247 Wis. 2d 564, 635 N.W.2d 7, 00-1564.