Updated 2026-05-19

Recoupment

A payer or customer recovery of amounts previously paid or credited.

Why it matters

Recoupment is particularly common in healthcare factoring, where payers such as Medicare and Medicaid have statutory rights to recover prior overpayments against current remittances. If a payer recoupts a past payment from a current invoice, the factor receives less than the expected remittance, potentially creating a shortfall against the advance already made. Factors working in healthcare or government receivables require disclosure of pending audits, investigations, or known recoupment demands before funding. Undisclosed recoupment risks can make invoices ineligible after funding and trigger repurchase obligations.

How it appears in contracts

Factoring agreements for healthcare and government receivables include specific recoupment provisions in the representations and warranties section. The seller typically represents that there are no pending recoupment demands or payer investigations affecting funded receivables at the time of submission. If a recoupment occurs after funding, the agreement defines who bears the loss: under recourse factoring, the seller repurchases the affected amount; under non-recourse, coverage depends on whether the recoupment was a credit risk event or a billing error. Government payer recoupment rights under federal statutes cannot be waived or limited by private contract.

Related terms

• Notice of assignment
• UCC-1
• Lockbox
• Assignment of receivables