Notice of assignment
A letter to the customer saying: payment for this invoice now goes to the factoring company, not to us. Once sent, the customer is legally obligated to pay the factor.
Why it matters
An accurate notice of assignment is essential for the factor's collection rights. Customers who do not receive or do not update their payment systems to reflect the notice may send payment to the original seller, creating a misdirected payment that must be returned and reprocessed. Errors in the notice—wrong invoice numbers, wrong lockbox address—cause the same problem. Timing matters too: sending the notice at the right point in the billing cycle reduces confusion for the customer's accounts payable team.
How it appears in contracts
The notice of assignment requirement appears in the 'Notification' or 'Assignment of Accounts' section. The contract will specify: (1) which party is responsible for sending the notice—some factors send it directly, others require you to do so on their template; (2) the required content of the notice, including the factor's payment address and wire or ACH instructions; and (3) what happens if a customer pays you after receiving the notice—most agreements treat such funds as trust funds you must forward to the factor within 24 to 48 hours or face default. If running a non-notification program, look for a separate 'Directed Payment' or 'Recourse on Misdirected Payment' clause instead.
Related terms
Related reading
Sources
- Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.