Notice of Assignment

A Notice of Assignment is simply a letter the factor sends to a client’s customer letting them know that the invoices have been sold and assigned. From that point forward, the customer is instructed to send all current and future payments directly to the factor, unless the factor later provides different instructions.

Usually, this notice goes straight to the accounts payable department, and here’s the key: it doesn’t need the customer’s sign-off or acknowledgement to be binding. Under the Uniform Commercial Code (Section 9-406a), if the customer pays anyone other than the factor, the debt isn’t considered paid off.

This process is essential because factoring isn’t a loan. Instead, the factor counts on receiving payments directly from the customers in order to make the arrangement work smoothly.