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What Is A Notice Of Assignment In The Trucking Industry?

To understand a notice of assignment, trucking company owners first have to be familiar with factoring—and to understand factoring, we’ll have to discuss the nuances of cash flow in the shipping industry.

Basically, the challenge for fleet owners (and owner-operators) is that their customers take forever to pay their invoices. You deliver a load and issue the invoice. The shipper may take 30 or 45 or 60 days—or more—to pay that invoice. Meanwhile, you’ve got fuel costs, payroll, insurance payments, and the thousand other financial obligations that keep your trucks on the road. You need that invoice paid now .

Factoring is the industry’s solution for quick payments to carriers. A factoring company steps in and pays your invoice today. Then that company collects from your customer, the shipper or broker who hired you to haul a given load. For their service, the factoring company keeps a low percentage of the total invoice value. (With Bobtail, the factoring fee ranges from 1.99% to 2.99%, depending on the volume of invoices you factor.)

Note that factoring is not a loan; the factoring company buys your invoices, so there’s no compounding interest or credit impact. Factoring beats loans as a cash-flow solution, hands down.

Struggling with slow payments from shippers and brokers? Keep cash flowing the simple way with Bobtail factoring.

With these preliminaries out of the way, we’re ready to answer the question that brought you here: What exactly is a notice of assignment in trucking?

Defining The Notice Of Assignment In Trucking

Factoring requires shippers and brokers to make changes in their billing systems. You’re no longer the collector on a factored invoice; the factoring company is. Accounts payable departments are busy places, and it’s easy for a shipper’s finance team to get confused when you do the work but another company collects the payment (after that company pays you, of course).

A notice of assignment clears up the billing relationship in a factoring agreement. A notice of assignment is a contractual document, supplied to both the carrier and the customer, that tells the customer to pay the factoring company, not the carrier.

The notice of assignment is an essential piece of paperwork, one of the documents you’ll have to keep on file as you establish a factoring relationship. You’ll have to sign the notice of assignment, and so will your customer. In short, this is a contractual agreement that carries legal consequences, and clarifies who exactly the shipper should pay for a delivered load.

Why is a notice of assignment important?

Consider the case of a trucking company that shifts to factoring after months or years of collecting directly from a shipper. That carrier’s payment details are already set up in the shipper’s accounting systems. Due to accidents or willful fraud, it’d be easy for the carrier to collect on an invoice twice—once from the factoring company and again from the customer.

In that scenario, the factoring company loses money, or at least becomes embroiled in a flurry of paperwork and legal challenges. So the notice of assignment is designed to protect the factoring company. But this document provides benefits for you, the carrier, and your customers, too.

How A Notice Of Assignment Benefits Shippers And Carriers

Who needs more paperwork? While it may seem like just another legal document, notices of assignment are actually helpful for all three parties involved in a factoring payment deal: the factoring company, sure, but also the carrier and the customer.

For shippers , the notice of assignment is a strong incentive to update payment details in their accounting systems. It delineates the nature of the financial agreement. It provides visibility and clarity that avoids conflict down the line. Most importantly, factoring companies require shippers to sign a notice of assignment—and factoring benefits customers, too. It keeps them from having to renegotiate payment terms, and gives them the full 30 or 60 days to pay, which allows them to optimize their own cash utilization.

Carriers also benefit from the clarity that comes with a notice of assignment. This document allows you to rest assured that the customer won’t accidentally pay you for a factored invoice, so you don’t have to spend all day trying to get the money into the right hands—or face collection threats of your own.

The binding agreement contained within a notice of assignment protects you from legal problems. It’s simply smart business to make sure everyone knows exactly who should get paid, and for what. Notices of assignment accomplish this goal—and, with Bobtail, the paperwork is simpler than you might think.

Simplifying Notices Of Assignment

Traditional factoring companies aren’t the most efficient financial operators in the world. They make you sign restrictive contracts. They might even tell you who you can work with, and who you can’t. They stack hidden fees on everything from set-up to ACH transfers to terminating the deal. And they make you fill out reams of paperwork before depositing a cent.

Bobtail is different every step of the way. We started this company to eliminate the inefficiencies in the factoring process, and that includes personalized assistance with handling notices of assignment.

When you sign up with Bobtail—a quick, online process involving a single application form—you’ll get a personal account manager who’s always ready to answer questions and solve problems. They’ll issue your notice of assignment and make sure your customers understand the document and why it’s necessary.

All you have to do is carry on carrying loads.

When you decide to factor an invoice, the process is even simpler. Just deliver the load, upload the invoice, attach a rate confirmation and a bill of lading, and get paid. It’s all done through Bobtail’s online system, so you can handle financing from the rig. We also provide a user-friendly digital dashboard that makes it easy to track every invoice at every step of the financing process. There’s simply no easier way to factor an invoice.

At Bobtail, we believe that you know what’s best for your business. That’s why we don’t make you sign a long-term contract; this is no-contract factoring. You pick which accounts to factor and which to collect from directly, and we don’t have volume requirements or exclusive financing deals.

We also don’t charge hidden fees. You just pay a flat factoring fee so there’s no confusion on exactly how much cash will hit your bank account—or when. Invoices are filled the same day you submit them, or the next day if the invoice arrives after 11 a.m. Eastern time.

Don’t be intimidated by a notice of assignment in trucking—or any other documents related to your factoring service. With Bobtail, our devoted customer service team makes sure everything runs smoothly, and we’re there to help every step of the way. Or, as one Trustpilot review puts it:

“They always answer the phone! The staff is very helpful and cordial. The three things I love are: Payments are on time, the website is easy to use, and great customer service!”

(Read more customer reviews on Trustpilot.)

Ready to improve cash flow without the headaches? Sign up to learn more today.

If you have questions about account set-up, notices of assignment, or anything else related to factoring, contact the Bobtail sales team at (410) 204-2084, or email us at [email protected].

Caroline Asiala is the Digital Marketing Manager at Bobtail. With a background rooted in advocating for migrant rights, Caroline leverages her expertise in content creation to support small trucking businesses, many of which are immigrant-owned and operated, with the information they need to make their businesses thrive.

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Learn About Notice of Assignment for Invoice Factoring

In a  factoring  relationship, you agree to assign your selected receivables to the factoring company. By advancing your  cash  against your invoices, the factor has purchased the right to collect amounts due from your customers. The Notice of Assignment is a critical part of your factoring paperwork as it reflects the change in invoice ownership.

What is a Notice of Assignment?

The Notice of Assignment is a simple letter the factoring company sends to your customers whose invoices you are factoring. In writing, the notice informs your customers that the accounts receivable is assigned, and future payments should be made payable to the factoring company. The notice will also include a remittance address so your customer can change their payment information.

The Notice of Assignment legally explains to your customers that any payments they make to you instead of the factor will not satisfy their obligation. The factoring company may hold your customers liable for misdirected amounts. This may occur if your customers choose to ignore the notice or fail to update payment information.

Many factors will require your customers to sign and return a copy of the notice to acknowledge receipt. This is not always required, though. Instead, the Notice of Assignment may include language that considers your customer’s continued use of your services to constitute an agreement to the notice. In addition, the factor may only revoke a Notice of Assignment if they send a signed and notarized release notification to your customers. They will do so if you choose not to factor that account any longer or you end your factoring relationship. In either case, the account must have no outstanding balance.

What Programs Don’t Use a Notice of Assignment?

Financing programs that do not use a notice of assignment include non-notification factoring and sales ledger financing.

Non-notification factoring is similar to regular factoring, but with a few key differences. Instead of sending a conventional Notice of Assignment to customers, the factoring company informs them of a new payment address using the company’s regular letterhead. This allows the customer to still send payments to the new address without being aware that it belongs to the factor. To qualify for non-notification factoring, companies typically need to have monthly revenues of at least $300,000, a track record of over a year, reliable financial reports, and no serious financial difficulties.

Sales ledger financing operates like a line of credit based on outstanding receivables. Companies can access up to 90% of their outstanding receivables at any given time without the need to submit a factoring schedule of accounts for each transaction. Although the finance company still handles payments, the customer does not receive a Notice of Assignment. Instead, they receive a letter indicating a change in the payment address. Sales ledger financing offers greater flexibility compared to non-notification factoring, with daily rates allowing for better cost control. The qualification requirements for sales ledger financing usually include monthly revenues of at least $300,000, a track record of 1-2 years, reliable financial reports, good receivables management systems, and no serious financial difficulties.

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Why do Factoring Companies Notify Your Customers?

The Notice of Assignment is a vital form of protection for a factoring company. It protects the factor in case the  business owner  (the factor’s client) receives the payment instead of the factoring company.

In a best-case scenario, the notice serves to inform every party in a factoring transaction of their rights and responsibilities. It also gives your customer the appropriate address to make account payments, allowing your factoring relationship to continue smoothly.

In a worst-case scenario, a factor can recover unpaid amounts from your customer should they continuously pay over notice or not pay at all. A Notice of Assignment is evidence in any legal proceeding — from a demand letter for payment to a full-fledged lawsuit — that asserts the factor’s standing and rights to payment.

What Will Your Customers Think?

Customers may have concerns or questions when they receive a letter regarding the use of invoice factoring. It’s understandable that they may be unsure or unfamiliar with this financing tool. As a business owner, it’s important to address these concerns and communicate with your customers effectively.

First and foremost, it’s essential to acknowledge that invoice factoring is a common practice utilized by many small and midsize companies to finance their operations and facilitate growth. Chances are, your customers are already aware of this financing method and how it works.

When discussing invoice factoring with your customers, emphasize the benefits it provides to them. By using factoring, you can offer them extended payment terms, such as 30- to 60-day terms, while still ensuring excellent service. This enables your customers to utilize their available cash resources more effectively. Without factoring, providing extended payment terms might be challenging, especially for businesses experiencing growth.

It’s crucial to assure your customers that little is changing in terms of the services and support your company provides. Reassure them that they will still have the same level of communication and engagement with you and your employees as before. Highlight that despite factoring being implemented, your commitment to their satisfaction remains unchanged.

Address the misconception that factoring indicates financial trouble within your company. Remind your customers that factoring is a versatile tool used to achieve various goals and objectives, just like other forms of financing such as loans or lines of credit. Factoring simply serves to smooth out your cash flow and support your business’s overall financial stability and growth.

Overall, open communication with your customers is key. Provide them with transparency and reassurance, explaining the benefits of factoring and emphasizing that it is a common and established financing practice. By effectively addressing their concerns, you can foster trust and maintain strong relationships with your valued customers.

Why a Notice of Assignment Matters To You

You will receive a copy of the Notice of Assignment that the factor sends to your customers. While the notice is to inform your customers, it also has an important implication for you as well.

As your  factoring agreement  explains, payments your company receives from your customers over notice are payable to the factoring company. Even in the smoothest transition, you may receive payments sent before receipt of the notice or released before your customers’ updated their payment system. There will likely be a provision explaining the procedure for sending misdirected payments to the factor in these cases. Misdirected payments are usually sent by overnight check or via bank transfer.

However, you may be responsible for additional penalties and fees if your customers continue to pay over notice, and you deposit those payments into your account. In addition, you may end up owing more, depending on fee structure, due to the extra time it takes for the factor to receive payment. Some factors include a misdirected payment fee in the  factoring agreement  that you will have to pay if you fail to return misdirected payments to the factor. Therefore, fees may be higher if you are responsible for the misdirection.

As with any legal document, be sure to be fully aware of the language used within the Notice of Assignment. Be mindful of your customers’ responsiveness to the notice. Take action immediately if you realize that any of your customers are not sending their payments on time. This transparency solidifies your factoring relationship, builds trust with your factor, and protects your interests.

What if the Payment is for an Invoice I Didn’t Factor?

When you assign your customers’ receivables to your factoring company, you agree to direct all payments to the factor, even for invoices that you did not factor. This eliminates complications for all parties and ensures that the factoring company receives every payment they should. Without an all-inclusive assignment, your customers would receive a notification every single time you factor an invoice. They would have to retain two addresses on file, increasing the likelihood of misdirected payments.

Your factoring company will have a straightforward procedure in place to address non-factored payments. This may include applying those payments to open invoices and sending you the difference or the total amount in a regularly scheduled reserve release. Stay prepared by asking your factor about their policies surrounding non-factored payments.

Factor Finders can help you find the right factoring company  for your  invoice factoring  needs.  Contact us  to learn more about our factoring services for every industry and to get started today.

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13 February 2023

Notice of Assignment in Factoring in the U.S

When a business uses invoice factoring, they transfer ownership of its accounts receivable to a factoring company, which then has the responsibility to collect payment for those invoices.

Therefore, a document is issued to alert its customers of this. This is known as a notice of assignment.

Meaning of Notice of Assignment

A notice of assignment is a document that notifies clients that a factoring company has acquired ownership of their accounts receivable, or invoices, from the original business.

The notice's objective is to alert customers to the ownership change and specify who should receive payments.

Importance of Notice of Assignment

A notice of assignment is vital because it officially notifies customers that the ownership of an invoice has changed hands and that they should now direct payments to the factoring company.

The notice helps ensure that payments are sent to the appropriate parties , avoiding misunderstandings and potential conflicts and preventing uncertainty.

In the event of a disagreement, having a detailed and official notice of assignment can safeguard the legal interests of both the company and the factoring company.

Impact of Notice of Assignment on Businesses

The possible impacts faced by businesses by using a factoring company and sending their customers a notice of assignment are:

1. Enhanced customer relationships: By providing clear and official notification to customers of the change in ownership of invoices, a business can help maintain and strengthen its relationship with them.

2. Improved cash flow: By transferring ownership of invoices to a factoring company, a business can receive payment more quickly and improve its overall cash flow.

3. Increased operational efficiency: By using a factoring company to manage the collections process, a business can free up internal resources and focus on its core operations, leading to increased efficiency.

4. Reduced risk: By transferring the responsibility of collecting payment to a factoring company, a business can reduce its exposure to the risk of non-payment and bad debt.

However, before deciding to utilize factoring , it's crucial to consider any potential drawbacks, such as losing control over the collection process and the expense of the factoring service.

Factors Covered in a Notice of Assignment The main sections covered are:

• The company's accounts receivable have been transferred to a third-party financial institution, and payment should now be made to them
• The customer should now send payments to a new address, typically a secure payment processing location
• The customer will be responsible if they make a payment to the wrong address

Information in a Notice of Assignment

In a factoring notice of assignment, the following details are covered to notify the business’ customer about the transfer of ownership of accounts receivable:

• Particulars of the accounts receivable being assigned , including the amount and invoice numbers
• Details of the factor and the client/debtor
• Specifics of the assignment of the accounts receivable, including the effective date and any conditions of the assignment
• Instructions for the customer on how to direct future payments to the factor
• Any other relevant terms and conditions of the factoring agreement

What Happens When an Obligor Doesn’t Receive Notice of Agreement

A business that sells its accounts receivables (invoices) to a third-party factor must send a notice of agreement to its customers.

The purpose of the notice is to inform the customer that the factor has taken ownership of the invoice, and the payments should be made directly to the factor instead of the business.

If the customer does not receive the notice, they may continue to make the payments to the business, leading to confusion, delayed payments to the factor and potential disputes.

In some cases, the customer may have the right to demand a return of the payment made to the factor or stop payment if the notice of assignment was not correctly given.

How to Receive Notice of Agreement

A factoring notice of agreement is typically provided by the factoring company or third-party factor that has purchased the accounts receivable (invoices) from the business.

The notice is usually generated by the factor and given to the business to send to its customers.

The business may also be responsible for ensuring that the notice of assignment is delivered correctly to its customers.

Some factoring companies provide templates or sample notices that the business can use.

Requirements for a Notice of Assignment

To obtain a notice of assignment (NOA) from a factoring company, the following requirements are necessary:

• Monthly revenue of at least $300,000
• A stable financial track record of 1-2 years
• Accurate and trustworthy financial reports
• Effective management of accounts receivable
• No significant financial difficulties

1. Who Sends a Factoring Notice of Assignment? A factoring notice of assignment is typically sent by the business that has sold its accounts receivables or invoices to a third-party factor or factoring company.

The factor usually provides the notice of assignment, and the business may have to sign a factoring agreement with the factor to obtain the notice.

The notice informs the business’ customers that the factor has taken over the ownership of the invoices, and the payments should be made directly to the factoring company instead of the business.

2. How Much Does a Notice of Assignment Cost? The cost for issuing a notice of assignment in factor can differ based on various elements, such as the amount assigned, the state where the assignment is taking place and the particular provisions of the assignment agreement.

This cost may include legal fees, filing paperwork fees and other administrative expenses. It's crucial to examine the assignment agreement thoroughly to determine the precise cost and be aware of any additional fees that may be incurred.

3. How Long Does a Notice of Assignment Take? The duration of issuing a notice of assignment in factoring can differ based on particular circumstances. Usually, the process can take anywhere between a few days to weeks.

The length of the time may be influenced by factors such as the state in which the assignment is getting issued, the complexity of the assignment agreement and the accessibility of relevant parties.

Moreover, the time needed for the notice of assignment may be affected by any legal challenges or hindrances.

4. Does Notice of Assessment Mean You Owe Money? In the United States, a notice of assessment usually implies that you owe money to the government.

However, it is contingent on particular circumstances. The Internal Revenue Service (IRS) sends out the notice of assessment to inform taxpayers of any modification to their tax obligations.

If the notice displays an increase in the amount owed, it implies that the taxpayer has an outstanding balance with the IRS and should pay it promptly to prevent further interest and penalties.

On the other hand, if it shows a decrease in the amount owed, it showcases that the taxpayer has paid more taxes than required and may be eligible for a refund.

It is, therefore, always advisable to thoroughly examine the notice and to get help from a professional.

5. Is Notice of Agreement a Proof of Debt? A notice of agreement alone is not considered proof of a debt. The document merely outlines the terms and conditions agreed upon by the parties involved.

It is not enough evidence to confirm the presence of debt but rather serves as a record of the agreement between the parties.

To establish proof of debt, other financial documents such as receipts, invoices or other documentation may be necessary.

The specific requirements for proving a debt depend upon the type of debt and the laws of the jurisdiction where it is being established.

6. What is a Letter of Release? A letter of release from a factoring company is a declaration that a debt has been satisfied and is no longer the company's responsibility.

In factoring, a business sells its accounts receivable to a factoring company for a fee to receive cash quickly.

Upon receiving the payment on the accounts receivable by the business’ customer, the factoring company issues a letter of release, confirming that the debt has been fully paid off and the company is no longer obligated to it.

The letter serves as proof that the debt has been fully resolved. It can be used to clear the debt from the business's financial records.

The specifics of the letter of release, including the terms and conditions, will depend on the particular factoring agreement and the laws in the jurisdiction where it is formed and drafted.

Siddhi Parekh

Finance manager at drip capital.

Table of Content

• Information in a NOA
• What Happens When an Obligor Doesn’t Receive NOA
• How to Receive NOA
• Requirements for NOA

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Factoring Notice of Assignment (NOA): Everything You Need to Know

A factoring notice of assignment (NOA) is usually required when you factor your invoices. Rest assured, NOAs are quite common in business and aren’t a cause for concern. However, it helps to understand what they are and how they work so that you can explain them to your customers as needed.

Assignment of Debt Explained

Companies transfer debt, along with all associated rights and obligations, to third parties all the time. One example of this occurs with collection companies. In these cases, the business, also referred to as the creditor, sells its uncollectable balances or assigns specific debts to the collection company. The collection company is then authorized to collect those specific balances on behalf of the creditor.

Assignment of debt may also come into play when businesses outsource their receivables and leverage certain types of funding, among other situations.

What Does Notice of Assignment Mean?

The customer, also referred to as the debtor, must be informed when a creditor assigns their debt to a third party. The document used in this process is referred to as a notice of assignment of debt.

What is a Notice of Assignment in Factoring?

When you leverage invoice factoring , you’re selling an unpaid B2B invoice to a factoring company at a discount. In exchange, you receive up to 98 percent of the invoice’s value right away and get the remaining sum minus a small factoring fee when your client pays. This means you’re not waiting 30, 60, or more days for payment. This cash flow acceleration helps businesses bridge cash flow gaps caused by slow-paying customers, seasonality, rapid growth, and more. Plus, the cash can be used for anything the business needs. This unique process means businesses can receive immediate funding without creating debt like other funding sources.

A notice of assignment is required in factoring because you’re assigning debt to a third party – the factoring company – and the customers involved need to know.

The Role of Notice of Assignment for Cash Flow

Invoice factoring stands out as a solution for businesses seeking to improve their cash flow. When a company decides to use invoice factoring, it enters into a factoring relationship, where accounts receivable and financial rights are handled differently than usual. This process involves the NOA, a pivotal document in factoring transactions. Essentially, NOA is a simple letter informing customers that the payment terms have changed and future payments should be made payable to the factoring company.

This notification ensures that there are no misdirected payments, which is a critical aspect when managing accounts payable and securing immediate cash. By using factoring, businesses can access working capital, which reduces the strain of slow-paying customers. It’s important for factoring clients to understand how factoring companies notify your customers and the implications of this process. The factoring contract typically outlines these details, ensuring that every party in a factoring transaction is aware of their responsibilities, especially regarding remittance addresses and payment information.

Factoring services offer an alternative to traditional lines of credit, providing businesses with high advances at low rates. This method is beneficial for companies that demand longer payment terms from their clients. By transferring the right to collect payments to the factoring company, the business can focus on its core operations while the finance company handles the receivables. Understanding the benefits of factoring and effectively communicating them to your customers may improve the factoring process and maintain healthy customer relationships, even when introducing new financial arrangements like invoice factoring.

The Importance of a Notice of Assignment in Factoring

Notice of Assignment in invoice factoring keeps your customers in the loop so they know who is collecting and why. It also lets them know where to send their payments. This streamlines the process and helps ensure there’s no confusion about where payments need to go.

Elements of a Factoring NOA Document

Each factoring company words its NOA a bit differently, but NOAs usually include:

• A statement that indicates the factoring company is now managing the invoice or invoices.
• A notice that payments should be made to the factoring company.
• Details on how payments can be made, including addresses, bank details, or payment portal information.
• What will occur if payments are sent to the business instead of the third party.
• A signature from someone at your business to show your customer that the NOA is authentic and a signature space for your customer to sign indicating that they’ve read and understand the document.

How Do Factoring Companies Notify Your Customers

A factoring notice of assignment is usually sent to customers by U.S. mail, though sometimes factoring companies use other delivery services or even digitize the NOA.

What Will Your Clients Think of You Factoring Your Invoices?

Sometimes, businesses that are new to invoice factoring have concerns about how customers will react to factoring or receiving an NOA. However, it’s usually not a cause for concern.

Although your factoring company isn’t an outsourcing company, it behaves quite similarly when collecting invoices. Nearly 40 percent of small businesses outsource at least one business process, Clutch reports. That means a significant portion of your customers already have some experience engaging with third parties. Furthermore, invoice factoring is growing in leaps and bounds and is expected to grow by eight percent in the coming years, per Grandview Research . Many of your customers already have experience with factoring or will very soon. Because most businesses have some exposure to factoring or will in the near future, it’s generally seen as an ordinary business practice – nothing more, nothing less.

However, even if factoring is entirely new to your customers, how they respond to your decision is often determined by how you present it. For instance, it accelerates payments without putting pressure on your customers to pay faster. It has benefits for them, too, and can help improve the relationship. This alone can actually help some businesses win bids or attract new customers. Explaining it to them this way can help soothe any concerns if customers come to you with questions.

How to Ensure Your Customer Relationships Are Protected

Most factoring companies will take good care of their customers because they are a reflection of you. Your repeat business helps ensure they’ll have repeat business. However, reviewing a factoring company’s testimonials and success stories is always a good idea to understand better how they operate before you sign up.

It’s also essential to work with a company like Viva that doesn’t send mass notifications to all its customers. We only notify those who are debtors on the invoices you’d like to factor to eliminate any confusion.

Lastly, it’s better to work with a company that provides you with 24/7 access to your account so you can see what’s paid and outstanding at a glance and can make decisions about orders using real-time data.

Request a Complimentary Invoice Factoring Quote

At Viva Capital, we always provide white glove care to the businesses we serve and their customers.As part of our service, we handle the Notice of Assignment with professionalism. Our collection experts make it easy for your customers to manage their bills and are happy to answer their questions. You’ll also have access to your personal Customer Account Portal so you can make informed decisions on the fly and always know what’s outstanding. To learn more or get started, request a complimentary invoice factoring quote .

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What is a Notice of Assignment?

• What is a Notice of…

A factoring contract can contain many parts, but few are as important as the Notice of Assignment.

What are the parts of a notice of assignment.

A notice of assignment contains a few standard parts. First, it informs your customers that you are factoring your invoices and that your factoring company has been assigned as the payee for your accounts receivables. Next, a notice of assignment provides your customer with an updated remittance address for all current and future payments to be sent to. Third, it contains explicit instructions that all payments should be made to the factoring company’s remittance address only, and that no other payments should be made to any other address without explicit permission from the factoring company. It also contains verbiage that states that payments made in conflict to this notice of assignment will not be considered to have discharged a customer’s obligation for payment to the factoring company. Lastly, the factoring client signs the notice of assignment to prove it is valid.

Why do my customers need to know that I’m factoring?

The right to receive payments for amounts owed is one of the main protections a factoring company has in the factoring process. It is an essential part of almost every factoring program. In order to assure that payments are directed appropriately, a factoring company must contact a customer to verify that the notice of assignment has been accepted and the remittance address has been updated.

Why does my factoring company receive payments for invoices that weren’t factored?

A notice of assignment gives your factoring company the right to collect for ALL payments owed to you by your customer. Some factoring companies require that you factor every invoice for your customers, making this a non-issue. However, if you are working with a factoring company that allows you to pick and choose which invoices to factor for a customer, your factoring company will also receive payments for those unfactored invoices.

This happens for two reasons. First, allowing multiple remittance addresses for a payee exponentially increases the chance of a misdirected payment being made. Second, asking the customer to shoulder the additional workload of keeping track of which payments should be made to which remittance address would make invoice factoring unattractive for many customers, and thus limit the number of companies willing to work with a business that was factoring. All factoring companies have policies to efficiently deal with unfactored payments when they arrive.

What happens if I receive a payment that should have been sent to my factoring company?

Most factoring companies understand that accidents happen, and mistakes will be made. If an error in payment occurs in good faith, factoring companies have processes in place to deal with the issue. Firstly, it is important that a factoring client does not deposit the payment into their account, but rather they should immediately notify their factoring company of the errant payment and send it immediately to their factoring company. If a factoring client fails to do so, or attempts to hide the payment from their factoring company, then that client will be responsible for a misdirected payment, which often carries heavy penalties in the factoring contract.

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Bankers Factoring an Employee-Owned Accounts Receivable Factoring Company

July 25, 2023 By Chris Curtin

What is a Notice of Assignment in Factoring?

Why is a factoring notice of assignment (noa) important when selling your a/r.

Table of contents

What is a notice of assignment letter, what is included in the factor financing noa, how does factoring noa impact my customers, benefits of noa factoring:, factoring arrangement: assignment of accounts receivable, notice of assignment factoring, bankers factoring difference, what is a notice of assignment in factoring.

It is a letter that informs the business owner’s customers of your relationship with a factoring company. The notice of assignment letter is the first communication between the invoice factor company and the account debtor (your customer). The factoring contract spells out the change in invoice ownership.

The invoice factoring companies will send your customers, also known as debtors, a notice of assignment (NOA) letter. It will be sent immediately when you sell your unpaid receivables. The letter is also a standard document in factoring agreements. And accounts receivable (A/R) invoice factoring is a common financial product to accelerate the cash flows of small businesses.

Factoring invoices is a time-tested business funding solution to support operations and fund growth plans. Partnering with factoring companies allows your business to receive fast cash flow by selling invoices. Moreover, sending the NOA letter is a critical step to communicate your A/R has been assigned and is payable to the factoring company.

You can also read how factoring companies buy accounts receivable .

Complete Bankers Factoring online funding application to begin your debt-free funding process including Bad Debt Protection.

Contact Bankers Factoring to learn about the factoring NOA process and how we can provide consistent cash flow funding. We partner with you and your customers to provide an elite program for your business success.

A Notice of Assignment (NOA) is a letter that informs account debtors their creditor (our client) is factoring invoices under the Universal Commercial Code (UCC) . And invoice factoring is an agreement to assign your accounts receivable (A/R) to a factoring company. So the letter communicates that a third party (factoring company) is managing and collecting your A/R. An assignment letter notifies your customers or account debtors of the transfer in ownership.

The NOA letter is the first-time customers will learn that you are utilizing factor financing. But selling your unpaid invoices to a factoring company will not concern your customer. In addition, invoice funding is a popular financing vehicle to cover operating expenses and accelerate sales growth.

Keep reading, Factoring Company: What it is and Your Best Choice .

Factoring NOA letters are standard documents sent to customer (debtor) accounting departments. Assignment letters include language regarding the arrangement:

• NOA letter informs your customers that a factoring company is managing receivable invoices
• The notice includes language stating the factoring company has the right to payments
• Your business A/R has been assigned to a third party, and payment is transferred to them
• Updated information for making payments (remittance) to factor
• Notice of assignment letters include legal clauses related to the assignment

Assignment companies send NOA to establish their ownership and management position for your receivables. That’s because letting your customers know about the receivable assignment helps them make timely payments. Moreover, the factor provides specific remittance instructions to ensure an easy transaction for all parties involved.

Keep reading How Does a Factoring Company Work ?

Selling your receivables can cause stress about sending an NOA letter to your customer. However, invoice factoring demonstrates to your customers that you are serious about your operational performance by establishing financing lines. In fact, the US factoring market valued at $3.9 billion in 2022 shows how many companies use invoice services ( IBISWorld ).

• Streamlined accounting process between your debtor’s accounts payable team and the factoring company.
• Partnering with a factoring company demonstrates your plans to grow your company and shows you are serious about your finances.
• Invoice factoring companies enhance customer service relationships by providing highly skilled professionals to communicate with your customers.

If your company works with commercial customers that demand extended credit terms, a factoring facility can help your cash flow.

Keep reading How Factor Financing Impacts Customer Relations .

A/R factoring is a type of business funding that injects working capital into companies with slow-paying customers. However, factoring agreements are not debt-financing like business loans and do not dilute your equity position. To know more, keep reading How to Finance Your Business Without Giving Up Equity .

Assigning accounts receivable lets your account debtors know you have transferred ownership of A/R. By selling your unpaid invoices, you receive two cash installments.

The initial cash advance, the first installment, ranges from 80 to 93% of your total A/R purchase value. And the second and final installment, rebate, or discount releases the remaining balance, less our fee. Therefore, the assignment of accounts receivable removes cash flow obstacles by bypassing the lengthy receivable period.

Factoring your receivables is a great solution to overcome cash flow struggles. Additionally, factoring companies work closely with your customers allowing you to focus on your business. But with over 800 factoring companies in the US, finding a factoring company can be difficult. Bankers Factoring provides the best service with 20 years of experience. We make sure to communicate well with our customers while protecting our client’s interests.  

Notice of assignment letters (NOA) can be scary for business owners unfamiliar with invoice factoring services. Most startups, small businesses, and companies extend credit terms requiring commercial funding. Offering net 30 to 120-day payment terms places cash flow problems for most entities.

Assignment letters should not turn you away from alternative financing. Your customers are familiar with NOA factoring and have other customers working with factoring companies.

Worrying about assignment letters only prevents your business from achieving its full potential. Bankers Factoring provides the best non-recourse factoring services and manages customer relations that enhance your business profile. Furthermore, we take on the credit risk from unpaid receivables while providing up to 93% cash advances. Accelerating your receivables cycle can unleash new sales growth and operational performance. Utilize free cash flow to improve profitability.

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What Is a Factoring Notice of Assignment?

If you have already worked with a factoring company, then you have probably heard the term Notice of Assignment (NOA) before. There can be so much paperwork involved with the operation of a small business these days. It can be hard to keep up with the times and know what everything is. 

For example, a notice of assignment (NOA) is actually a very common document utilized in the trucking industry. It’s ideal for companies using a factoring transaction service because a factoring fee will pay them on the load in advance.

From there, the factoring company will be responsible for collecting payment for the service from the customer. Today, we will be taking a deeper look into the Notice of Assignment to better understand the importance of NOAs and why we need them. 

TAFS is More than Freight Factoring

How does an noa work.

Once a factoring company has paid the client for the load, it is important that the debtor knows that the money they owe is now due to another party. This official notification is delivered via a Notice of Assignment. It will be sent out to the debtor as a way of informing them that their payments must now be remitted to the factoring company instead of the carrier. 

Why is an NOA Important?

An NOA is a legal document that acts as a way of notifying the debtor about who they need to pay. When a carrier works with a factoring company, the TAFs Factoring carrier will be paid in advance by the factoring company, so it is important that the debtor is informed of the presence of the third party that will now be managing that company’s accounts receivable (AR). 

An NOA can also ensure that the debtor understands there’s a third party that will be collecting payments from them on behalf of the carrier. Notifying the debtor of this change will make it more likely to avoid payments being sent to the wrong party as well as conflicts and violations of the factoring client agreement.

What Is Covered in an NOA?

In a standard Notice of Assignment, you will find legal forms stating that the assignment of accounts receivable of the business has been assigned to a third-party provider. As such, payments are now payable directly to them. 

The NOA will include an updated address of the third party so that the debtor knows where to send any future payments, as well as the third party’s phone number and a statement letting the customer know that he or she will be held liable in the event of a misdirected payment. 

Will Factoring Affect My Work With My Client?

Working with a factoring company should not negatively impact any work that you do for your clients. The truth is that factoring is extremely common these days and in the larger picture, most business owners work with some form of a lender. 

What you can do on a personal level to avoid any confusion or worry is to simply assure your customers that invoice factoring will not affect the service you are providing to them and they can continue to expect the same level of service and attention in working with you. 

What Will Customers Think When They Receive an NOA?

Nowadays, a large percentage of companies use factoring or some sort of third-party financing option to help keep their operations flowing smoothly from one invoice payout to the next. This is often a display of good business management and dependability in the eyes of your clients. By taking control of your company’s finances, you’re letting them know that you are serious about your business and you plan to be around for years to come.

Is There a Financing Option That Will Not Send an NOA?

Select factoring companies may offer what is known as a non-notification factoring plan in which a conventional deed of assignment is not used. This plan is not often used because it leads to unnecessary confusion, which often results in payments being sent to the wrong party. 

This happens because no matter what, the debtor is still required to mail the payment to the factoring company, but instead of an NOA being issued and making this clear, the company’s letterhead is included. 

Example of an NOA

An NOA is often used in circumstances where a trucking company is utilizing a factoring company to manage their receivable financing for them. The Notice of Assignment is sent to the debtor with clear notification that the accounts receivable of the company they are doing business with are being managed by a third party.

It will properly advise the remittance address for their payments moving forward. With this official notice being received it is now up to the debtor to comply and update their system to make sure payments are processed to the correct party. 

4 Things To Consider When Factoring 

If you are going to use a factoring company here are some things you may want to consider regarding the NOA. 

Responsibility

The responsibility lies with both the carrier and the factoring company. The factoring company will send NOAs to many debtors but it is hard for a factoring company to know every customer a carrier has or will work with. For this reason, the responsibility also falls on the carrier as well to notify all of their customers of the new payment conditions. 

Requirements

The Notice of Assignment is required to be sent out so that the customer is fully aware of who they are legally obligated to pay. Without this notice, many payments would be sent to the incorrect party causing many issues that would deeply complicate the process.

If the trucking company accepts payment from the customer when it should have gone to the factoring company, the trucking company would be in violation of the contract and could be assessed additional fees or charged with fraud. 

Being notified of a factoring company being used is not a bad thing. Utilizing a f actoring company allows the carrier the ability to maintain operations within the windows of payment terms on the loads which may not pay out for 30 days or 60 days. In some cases, it might even be 90 days. 

Most factoring company contracts require carriers to submit every single invoice to minimize the likelihood of causing confusion. If the debtor has to change who they pay for different invoices, the odds are that errors will occur and payment will be sent to the wrong place. That is also why debtors don’t change who they pay after receiving an NOA unless they have an official release letter from the factoring company. This is a red flag for a carrier trying to commit fraud.  

Receiving an NOA Is Actually a Good Thing

In conclusion, we now know that receiving an NOA will inform the recipient that the carrier they used is collecting money via a factoring company or other third-party business. As such, they will not be managing their accounts receivable. This means they are taking their business seriously and making moves to ensure their company will be around for years to come, and with the ability to grow and expand.

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What is a Notice of Assignment?

In This Article

When you enter a factoring contract, you agree to sell your invoices, or accounts receivable, to a factoring company or third party that gives you a cash advance. This third party will then become your company’s collection department on these invoices. To notify your clients of this change of invoice ownership, the financial provider will send them a Notice of Assignment (NOA).

If you’re considering factoring your accounts receivable, you may be wondering what an NOA contains and what effects it may have on your customers and business. In this guide, we’ll cover the components of an NOA, how your factoring company sends them, and their role in the factoring process.

What is a NOA in Factoring?

A notice of assignment is a simple letter from a third party to your customers. It legally explains that a change of invoice ownership has occurred, informing your clients that a third party (bank, factoring company, financing company) will now manage and collect accounts receivable. The NOA will provide a remittance address so customers can update their payment information. The purpose of this communication is to notify your customers of a change in the collection process.

What Is a Notice of Assignment?

Understand how implementing a Notice of Assignment with Porter Capital’s factoring services can fast-track your receivables!

Discover Our Factoring Services

How Do Factoring Companies Notify Your Customers?

Factoring is more common than ever and clients range from NYC modeling agencies and namesake branded product line manufacturers, to small startup companies selling gourmet food items. No company is too large or too small to factor their invoices and many work with big box stores that demand longer payment terms to have products on their shelves. These 90 to 120 day payment terms can make factoring a necessity for smooth cash flow.

Your customers will receive the NOA as a letter in the mail to sign and return. Your business will also receive a copy of this letter. Ensure you fully understand the language used in the NOA and your responsibilities in the transition process. Sometimes business owners worry about their customers’ reactions to receiving an NOA. Invoice factoring is becoming an increasingly popular and acceptable means for financing businesses across many industries, so your customers may already be accustomed to the process. You can alert your clients about a coming NOA, proactively resolving any questions or concerns that may arise.

Why Is a NOA in Factoring Important?

When you enter a factoring contract, you agree to sell the intangible financial rights to your invoices and receive cash up front for those invoices. Because the rights are intangible, factoring companies need legal language that outlines ownership of the AR. Once the NOA is completed, a business receives the cash advance while the factor waits for invoice payments. The NOA is a critical part of the financial relationship and protects the financing provider in the event of misdirected payments. An NOA ensures all parties are aware of their responsibilities throughout the factoring process so everyone can enjoy the benefits.

Components of a NOA Document

The NOA document will contain a few vital pieces of information, including:

• Notification that accounts receivable have been assigned and is payable to a third party
• An updated payment address.
• An explanation of customer liability in the event of a misdirected payment.

Each component of the NOA ensures the factoring relationship runs smoothly by giving customers the information they need to make correct payments. It may also outline steps for your company to take if you receive a misdirected payment.

Contact Porter Capital for a Factoring Quote

When you need to improve your cash flow, consider invoice factoring with Porter Capital. With over 30 years in the business, we can offer you and your customers the reliable and trustworthy services you expect and deserve. We will help you find the best solutions for your specific business demands, enabling you to enjoy greater stability and flexibility.

Work with a trusted factoring company to expand your business, get ahead of the competition and increase customer satisfaction. Contact us online today to receive a quote for our factoring services.

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What is a notice of assignment?

An assignment takes place when one party is holding a right to property, claims, bills, lease, etc., of another party and wishes to pass it along (or sell it) to a third party. As complicated as that sounds, it really isn’t. Strangely enough, many assignments can be made under the law without immediately informing, or obtaining the permission, of the personal obligated to perform under the contract. An example of this is when your mortgage is sold to another mortgage company. The original mortgage company may not inform you for several weeks, and they certainly aren’t going to ask your permission to make the sale.

If a person obligated to perform has received notice of the assignment and still insists on paying the initial assignor, the person will still be obligated to pay the new assignee according to the agreement. If the obligated party has not yet been informed of the assignment and pays the original note holder (assignor), the assignor is obligated to turn those funds over to the new assignee. But, what are the remedies if this doesn’t take place? Actually, the new assignee may find themselves in a difficult position if the assignor simply takes off with their funds or payment. They are limited to taking action against the person they bought the note from (assignor) and cannot hold the obligator liable. Therefore, it is important to remember that if any note or obligation is assigned to another party, each party should be well aware of their responsibilities in the transaction and uphold them according to the laws of their state. Assignment forms should be well thought out and written in a manner which prevents the failure of one party against another.

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Advanced Commercial Capital

Freight factoring articles.

Notice of Assignment in Trucking

What is a Notice of Assignment in Trucking?

When you factor your invoices, you are essentially selling them to the factoring company. The factoring company then collects the payment from your customer on your behalf. In order for the factoring company to have the legal right to collect payment from your customer, you will need to sign a notice of assignment.

A notice of assignment in trucking is a document that assigns the right to collect payment on an invoice to the factoring company. The notice of assignment also assigns the right to receive any future payments on the invoice to the factoring company.

Why is a Notice of Assignment Important?

A notice of assignment in trucking is important because it protects the factor’s (or the organization to which the receivables have been assigned) interest in the receivables. The notice of assignment also allows the factor to perfect its security interest in the receivables, and provides notice to the debtor that the receivables have been assigned and that payments should be made to the factor. Another reason why a notice of assignment is important is that it allows the factor to take action against the debtor in the event of a default on the receivables. Without a notice of assignment, the factor would not have any legal recourse against the debtor.

The notice of assignment also helps introduce the factoring company to the debtor. This is because the debtor will now be dealing with the factoring company instead of the business that assigned the receivables.

What is Covered in a Notice of Assignment?

When a trucking company factors their receivables, they are selling their invoices to a factoring company at a discount in order to receive immediate cash. The factoring company then becomes the receivable’s owner and has the right to collect payment from the debtor. In order to protect their investment, the factoring company will send a notice of assignment to the debtor, informing them that they now owe payment to the factoring company, not the trucking company.

The notice of assignment usually includes the following information:

-The name and contact information of the factoring company -The name and contact information of the trucking company -The invoice number or numbers that have been assigned to the factoring company -The amount of the invoice or invoices that have been assigned -The due date or dates of the invoice or invoices -The name and contact information of the debtor -A statement informing the debtor that they now owe payment to the factoring company instead of the trucking company -The factoring company’s terms and conditions for payment as well as payment details

Sending a notice of assignment to the debtor protects the factoring company’s investment and ensures that they will be paid for the invoices that they have purchased. It also allows the trucking company to focus on its business instead of chasing down payments from debtors.

Notice of Assignment Examples

It is common for businesses in the trucking industry to use factoring as a way to finance their operations. In order to secure funding, companies will often sign over their accounts receivable to the factor. This means that the factor has the right to collect payments on behalf of the company. When this occurs, the factor will typically send a notice of assignment to the company’s customers.

The notice of assignment informs the customer that the invoice has been assigned to the factor and provides instructions on how to make payment. It is important to include all relevant information in the notice, such as the amount owed, the due date, and the mailing address or website where payment should be sent.

Below is an example of a notice of assignment that a company might send to its customers:

Customer LLC

123 Main Street

Anytown, USA 99999

Dear Sir/Madam

RE NOTICE OF ASSIGNMENT.

Dear Customer,

We are writing to inform you that your invoice number 12345 has been assigned to ABC Factoring Company. Please remit payment for the invoice in full to ABC Factoring Company at the following address:

ABC Factoring Company

You can also make payments online at www.abcfactoring.com. Please be sure to reference your invoice number when making a payment. Kindly note you are liable for any misdirected payment, and as such we strongly advise you to take note of the change in payment details.

If you have any questions, please contact our office at 555-555-1234.

Thank you for your prompt attention to this matter.

Your Company Name

An example of a notice of assignment sent by a factoring company to the debtors:

Dear Debtor,

According to the agreement between your company and our client – the Assignor – we hereby inform you that all the Assignor’s rights, title and interest in the account receivable described below were assigned and transferred to us, effective as of the date of this notice. All payments should now be made payable to and mailed to our address:

New Factor’s Name

The Assigned Account Receivable:

Description of Invoice: Invoice Number:

Amount: Due Date:

From now on, you should direct all your questions and requests concerning the above-mentioned invoice to us.

Should you have any questions, please do not hesitate to contact us.

The Factor’s Name.

As you can see, a notice of assignment is a simple but important document that companies in the trucking industry often use when factoring their invoices. The notice informs the debtor that the invoice has been assigned to the factor and provides instructions on how to make payment. By including all relevant information in the notice, such as the amount owed, rate confirmation, the due date, and the mailing address or website where payment should be sent, companies can help ensure that their customers make timely payments and avoid confusion. Advanced Commercial Capital, we are experts in factoring for the trucking industry and can help you get the funding you need to grow your business. Contact us today to learn more.

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Legal Templates

Home Business Assignment Agreement

Assignment Agreement Template

Use our assignment agreement to transfer contractual obligations.

Updated February 1, 2024 Reviewed by Brooke Davis

An assignment agreement is a legal document that transfers rights, responsibilities, and benefits from one party (the “assignor”) to another (the “assignee”). You can use it to reassign debt, real estate, intellectual property, leases, insurance policies, and government contracts.

What Is an Assignment Agreement?

What to include in an assignment agreement, how to assign a contract, how to write an assignment agreement, assignment agreement sample.

Partnership Interest

An assignment agreement effectively transfers the rights and obligations of a person or entity under an initial contract to another. The original party is the assignor, and the assignee takes on the contract’s duties and benefits.

It’s often a requirement to let the other party in the original deal know the contract is being transferred. It’s essential to create this form thoughtfully, as a poorly written assignment agreement may leave the assignor obligated to certain aspects of the deal.

The most common use of an assignment agreement occurs when the assignor no longer can or wants to continue with a contract. Instead of leaving the initial party or breaking the agreement, the assignor can transfer the contract to another individual or entity.

For example, imagine a small residential trash collection service plans to close its operations. Before it closes, the business brokers a deal to send its accounts to a curbside pickup company providing similar services. After notifying account holders, the latter company continues the service while receiving payment.

Create a thorough assignment agreement by including the following information:

• Effective Date:  The document must indicate when the transfer of rights and obligations occurs.
• Parties:  Include the full name and address of the assignor, assignee, and obligor (if required).
• Assignment:  Provide details that identify the original contract being assigned.
• Third-Party Approval: If the initial contract requires the approval of the obligor, note the date the approval was received.
• Signatures:  Both parties must sign and date the printed assignment contract template once completed. If a notary is required, wait until you are in the presence of the official and present identification before signing. Failure to do so may result in having to redo the assignment contract.

Review the Contract Terms

Carefully review the terms of the existing contract. Some contracts may have specific provisions regarding assignment. Check for any restrictions or requirements related to assigning the contract.

Check for Anti-Assignment Clauses

Some contracts include anti-assignment clauses that prohibit or restrict the ability to assign the contract without the consent of the other party. If there’s such a clause, you may need the consent of the original parties to proceed.

Determine Assignability

Ensure that the contract is assignable. Some contracts, especially those involving personal services or unique skills, may not be assignable without the other party’s agreement.

Get Consent from the Other Party (if Required)

If the contract includes an anti-assignment clause or requires consent for assignment, seek written consent from the other party. This can often be done through a formal amendment to the contract.

Prepare an Assignment Agreement

Draft an assignment agreement that clearly outlines the transfer of rights and obligations from the assignor (the party assigning the contract) to the assignee (the party receiving the assignment). Include details such as the names of the parties, the effective date of the assignment, and the specific rights and obligations being transferred.

Include Original Contract Information

Attach a copy of the original contract or reference its key terms in the assignment agreement. This helps in clearly identifying the contract being assigned.

Execution of the Assignment Agreement

Both the assignor and assignee should sign the assignment agreement. Signatures should be notarized if required by the contract or local laws.

Notice to the Other Party

Provide notice of the assignment to the non-assigning party. This can be done formally through a letter or as specified in the contract.

File the Assignment

File the assignment agreement with the appropriate parties or entities as required. This may include filing with the original contracting party or relevant government authorities.

Communicate with Third Parties

Inform any relevant third parties, such as suppliers, customers, or service providers, about the assignment to ensure a smooth transition.

Keep Copies for Records

Keep copies of the assignment agreement, original contract, and any related communications for your records.

Here’s a list of steps on how to write an assignment agreement:

Step 1 – List the Assignor’s and Assignee’s Details

List all of the pertinent information regarding the parties involved in the transfer. This information includes their full names, addresses, phone numbers, and other relevant contact information.

This step clarifies who’s transferring the initial contract and who will take on its responsibilities.

Step 2 – Provide Original Contract Information

Describing and identifying the contract that is effectively being reassigned is essential. This step avoids any confusion after the transfer has been completed.

Step 3 – State the Consideration

Provide accurate information regarding the amount the assignee pays to assume the contract. This figure should include taxes and any relevant peripheral expenses. If the assignee will pay the consideration over a period, indicate the method and installments.

Step 4 – Provide Any Terms and Conditions

The terms and conditions of any agreement are crucial to a smooth transaction. You must cover issues such as dispute resolution, governing law, obligor approval, and any relevant clauses.

Step 5 – Obtain Signatures

Both parties must sign the agreement to ensure it is legally binding and that they have read and understood the contract. If a notary is required, wait to sign off in their presence.

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Notice of Assignment Template

Document description.

This notice of assignment template has 1 pages and is a MS Word file type listed under our legal agreements documents.

Sample of our notice of assignment template:

OBJECT: NOTICE OF ASSIGNMENT Dear [CONTACT NAME], You are hereby notified that on [DATE] we have assigned and transferred to [SPECIFY] the following [SPECIFY] existing between us: [DESCRIBE] Please direct any further correspondence (or payments, if applicable) to them at the following address: [ADDRESS] Please contact us should you have any questions. Thank you for your cooperation. [YOUR NAME] [YOUR TITLE] [YOUR PHONE NUMBER] [[email protected]] [YOUR COMPANY NAME] [YOUR COMPLETE ADDRESS] Tel: [YOUR PHONE NU

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

• [email protected]
• T:  +44 (0)370 733 0605
• Download vCard for  Catherine Phillips

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Notice of Assignment (TX) | Practical Law

Notice of Assignment (TX)

Practical law standard document w-016-2255  (approx. 11 pages).

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Notice of Assignment

Practical law standard document 2-508-6945  (approx. 11 pages).

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Deed of Assignment and the Notice of Assignment -What is the Difference?

In this article, Richard Gray barrister takes a brief look at the differences between a Deed of Assignment and a Notice of Assignment and the effect of the assignment on the contracting party

At the end of 2020, Elysium Law were instructed to act for a significant number of clients in relation to claims made by a company known as Felicitas Solutions Ltd (an Isle of Man Company) for recovery of loans which had been assigned out of various trust companies following loan planning entered into by various employees/contractors.

Following our detailed response, as to which please see the article on our website written by my colleague Ruby Keeler-Williams , the threatened litigation by way of debt claims seem to disappear. It is important to note that the original loans had been assigned by various Trustees to Felicitas, by reason of which, Felicitas stood in the shoes of the original creditor, which allowed the threatened action to be pursued.

After a period of inertia, Our Clients, as well as others, have been served with demand letters by a new assignee known as West 28 th Street Ltd . Accompanying the demand letters is a Notice of Assignment, by reason of which the Assignee has informed the alleged debtor of the Assignees right to enforce the debt.

Following two conferences we held last week and a number of phone call enquiries which we have received, we have been asked to comment upon the purport and effect of the Notice of Assignment, which the alleged debtors have received. Questions such as what does this mean (relating to the content) but more importantly is the ‘Notice’ valid?

Here I want to look briefly at the differences between the two documents.

There is no need for payment to make the assignment valid and therefore it is normally created by Deed.

 The creation of a legal assignment is governed by Section 136 of the Law of Property Act 1925:

136 Legal assignments of things in action.

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

(a) the legal right to such debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor:

Some of the basic requirements for a legal assignment are;

• The assignment must not be subject to conditions.
• The rights to be assigned must not relate to only part of a debt, or other legal chose in action.
• The assignment must be in writing and signed by the assignor.
• The other party or parties to the agreement must be given notice of the assignment.

Notice of assignment

To create a legal assignment, section 136 requires that express notice in writing of the assignment must be given to the other contracting party (the debtor).

Notice must be in writing

Section 136 of the LPA 1925 requires “express notice in writing” to be given to the other original contracting party (or parties).

 Must the notice take any particular form?

The short answer is no. Other than the requirement that it is in writing, there is no prescribed form for the notice of assignment or its contents. However, common sense suggests that the notice must clearly identify the agreement concerned.

Can we  challenge the Notice?

No. You can challenge the validity of the assignment assignment by ‘attacking the Deed, which must conform with Section 136. In this specific case, the Notice sent by West 28 th Street in itself is valid. Clearly, any claims made must be effected by a compliant Deed and it is that which will require detailed consideration before any right to claim under the alleged debt is considered.

Can I demand sight of the assignment agreement

On receiving a notice of assignment, you may seek to satisfy yourself that the assignment has in fact taken place. The Court of Appeal has confirmed that this is a valid concern, but that does not give an automatic right to require sight of the assignment agreement.

In Van Lynn Developments Limited v Pelias Construction Co [1969]1QB 607  Lord  Denning said:

“After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid…”

The Court of Appeal subsequently confirmed this  stating the contracting party is entitled to satisfy itself that a valid absolute assignment has taken place, so that it can be confident the assignee can give it a good discharge of its obligations

The important document is the Deed of Assignment, which sets out the rights assigned by the Assignor. The Notice of Assignment is simply a communication that there has been an assignment. The deed is governed by Section 136 of the LP 1925. It should be possible to obtain a copy of the Deed prior to any action taken in respect of it.

For more information on the claims by West 28 th Street or if advice is needed on the drafting of a Deed, then please call us on 0151-328-1968 or visit www.elysium-law.com .

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