what is a notice of assignment of debt

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Debt Assignment: How They Work, Considerations and Benefits

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Investopedia / Ryan Oakley

What Is Debt Assignment?

The term debt assignment refers to a transfer of debt , and all the associated rights and obligations, from a creditor to a third party. The assignment is a legal transfer to the other party, who then becomes the owner of the debt. In most cases, a debt assignment is issued to a debt collector who then assumes responsibility to collect the debt.

Key Takeaways

Debt assignment is a transfer of debt, and all the associated rights and obligations, from a creditor to a third party (often a debt collector).
The company assigning the debt may do so to improve its liquidity and/or to reduce its risk exposure.
The debtor must be notified when a debt is assigned so they know who to make payments to and where to send them.
Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), a federal law overseen by the Federal Trade Commission (FTC).

How Debt Assignments Work

When a creditor lends an individual or business money, it does so with the confidence that the capital it lends out—as well as the interest payments charged for the privilege—is repaid in a timely fashion. The lender , or the extender of credit , will wait to recoup all the money owed according to the conditions and timeframe laid out in the contract.

In certain circumstances, the lender may decide it no longer wants to be responsible for servicing the loan and opt to sell the debt to a third party instead. Should that happen, a Notice of Assignment (NOA) is sent out to the debtor , the recipient of the loan, informing them that somebody else is now responsible for collecting any outstanding amount. This is referred to as a debt assignment.

The debtor must be notified when a debt is assigned to a third party so that they know who to make payments to and where to send them. If the debtor sends payments to the old creditor after the debt has been assigned, it is likely that the payments will not be accepted. This could cause the debtor to unintentionally default.

When a debtor receives such a notice, it's also generally a good idea for them to verify that the new creditor has recorded the correct total balance and monthly payment for the debt owed. In some cases, the new owner of the debt might even want to propose changes to the original terms of the loan. Should this path be pursued, the creditor is obligated to immediately notify the debtor and give them adequate time to respond.

The debtor still maintains the same legal rights and protections held with the original creditor after a debt assignment.

Special Considerations

Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA). The FDCPA, a federal law overseen by the Federal Trade Commission (FTC), restricts the means and methods by which third-party debt collectors can contact debtors, the time of day they can make contact, and the number of times they are allowed to call debtors.

If the FDCPA is violated, a debtor may be able to file suit against the debt collection company and the individual debt collector for damages and attorney fees within one year. The terms of the FDCPA are available for review on the FTC's website .

Benefits of Debt Assignment

There are several reasons why a creditor may decide to assign its debt to someone else. This option is often exercised to improve liquidity and/or to reduce risk exposure. A lender may be urgently in need of a quick injection of capital. Alternatively, it might have accumulated lots of high-risk loans and be wary that many of them could default . In cases like these, creditors may be willing to get rid of them swiftly for pennies on the dollar if it means improving their financial outlook and appeasing worried investors. At other times, the creditor may decide the debt is too old to waste its resources on collections, or selling or assigning it to a third party to pick up the collection activity. In these instances, a company would not assign their debt to a third party.

Criticism of Debt Assignment

The process of assigning debt has drawn a fair bit of criticism, especially over the past few decades. Debt buyers have been accused of engaging in all kinds of unethical practices to get paid, including issuing threats and regularly harassing debtors. In some cases, they have also been charged with chasing up debts that have already been settled.

Federal Trade Commission. " Fair Debt Collection Practices Act ." Accessed June 29, 2021.

Federal Trade Commission. " Debt Collection FAQs ." Accessed June 29, 2021.

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What is an Assignment of Debt?

By Vanessa Swain Senior Lawyer

Updated on February 22, 2023 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

Perfecting Assignment

Enforcing an Assigned Debt

Recovery of an Assigned Debt

Other Considerations

Key Takeaways

Frequently asked questions.

I t is common for creditors, such as banks and other financiers, to assign their debt to a third party. Usually, an assig nment of debt is done in an effort to minimise the costs of recovery where a debtor has been delinquent for some time. This article looks at:

what it means to ‘assign a debt’;
the legal requirements to perfecting an assignment; and
common problems with enforcing an assigned debt.

Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.

This manual aims to help business owners, financial controllers and credit managers best manage and recover their debt.

An assignment of debt, in simple terms, is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once a debt is properly assigned, all rights and responsibilities of the original creditor (the assignor ) transfer to the new owner (the assignee ). Once an assignment of debt has been perfected, the assignee can collect the full amount of the debt owed . This includes interest recoverable under the original contract, as if they were the original creditor. A debtor is still responsible for paying the outstanding debt after an assignment. However, now, the debt or must pay the debt to the assignee rather than the original creditor.

Purchasing debt can be a lucrative business. Creditors will generally sell debt at a loss, for example, 20c for each dollar owed. Although, the amount paid will vary depending on factors such as the age of the debt and the likelihood of recovery. This can be a tax write off for the assignor, while the assignee can take steps to recover 100% of the debt owed.

In New South Wales, the requirements for a legally binding assignment of debt are set out in the Conveyancing Act :

the assignment must be in writing. You do this in the form of a deed (deed of assignment) and both the assignor and assignee sign it; and
the assignor must provide notice to the debtor. The requirement for notice must be express and must be in writing. The assignor must notify the debtor advising them of the debt’ s assign ment and to who it has been assigned. The assignee will send a separate notice to the debtor, putting them on notice that the debt is due and payable. They will also provide them with the necessary information to make payment.

The assignor must send the notices to the debtor’s last known address.

Debtor as a Joined Party

In some circumstances, a debtor will be joined as a party to the deed of assignment . There can be a great benefit in this approach . This is because the debtor can provide warranties that the debt is owed and has clear notice of the assignment. However, it is not always practical to do so for a few reasons:

a debtor may not be on speaking terms with the assignor;
a debtor may not be prepared to co-operate or provide appropriate warranties; and
the assignor or the assignee may not want the debtor to be made aware of the sale price . This occurs particularly where the sale price is at a significant discount.

If the debtor is not a party to the deed of assignment, proper notice of the assignment must be provided.

An assignment of debt that has not been properly perfected will not constitute a legal debt owing to the assignee. Rather, the legal right to recover the debt will remain with the assignor. Only an equitable interest in the debt will transfer to the assignee.

Enforcing an Assigned Debt

After validly assigning a debt (in writing and notice has been provided to the debtor’s last known place of residence), the assignee is entitled to take any legal steps available to them to recover the outstanding debt. These recovery options include:

commencing court proceedings;
obtaining a judgment; and
enforcement of that judgment.

Suppose court proceedings have been commenced or judgment already entered in favour of the assignor. In that case, the assignee must take steps to have the proceedings or judgment formally changed into the assignee’s name.

In our experience, recovery of an assigned debt can be problematic because:

debtors often do not understand the concept of debt assignment and may not be aware that their credit contract contains an assignment of debt clause;
disputes can arise as to whether a lawful assignment of debt has arisen. A debtor may claim that the assignor did not provide them with the requisite notice of the assignment, or in some cases, a contract will specifically exclude the creditor from legally assigning a debt;
proper records of the notice of assignment provided to the debtor must be maintained. If proper records have not been kept, it may be difficult to prove that notice has been properly given, which may invalidate the legal assignment; and
the debtor has the right to make an offsetting claim in defence to any recovery action taken by the assignee. A debtor may raise an offsetting claim which has arisen out of a previous arrangement with the assignor (which the assignee may not be aware of). For example, the debtor may have entered into an agreement with the assignor whereby the assignor agreed to accept a lesser amount of the debt owed by way of settlement. Because the assignee acquires the same rights and obligations of the assignor, the terms of that previous settlement agreement will bind the assignee. The court may find that there is no debt owing by the debtor. In this case, the assignee will have been assigned nothing of value.

Other Considerations

When assigning a debt, it is essential that the assignee, in particular, considers relevant statutory limitation periods for commencing proceedings or enforcing a judgment debt . In New South Wales, the time limit:

to file legal proceedings to recover debts is six years from the date of last payment or when the debtor admitted in writing that they owed the debt; and
for enforcing a judgment debt is 12 years from the date of judgment.

An assignment of a debt does not extend these limitation periods.

While there can be benefits to both the assignor and the assignee, an assignment of debt will be unenforceable if done incorrectly. Therefore, if you are considering assigning or being assigned a debt, it is important to seek legal advice. If you need help with drafting or reviewing a deed of assignment or wish to recover a debt that has been assigned to you, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.

An assignment of debt is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once the assignee has validly assigned a debt, they are entitled to take any legal steps available to them to recover the outstanding debt. This includes commencing court proceedings, obtaining a judgment and enforcement of that judgment.

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Assignment Of Debt Agreement

Jump to section, what is an assignment of debt agreement.

An assignment of debt agreement is a legal document between a debtor and creditor that outlines the repayment terms. An assignment of debt agreement can be used as an alternative to bankruptcy, but several requirements must be met for it to work.

In addition, if obligations are not met under a debt agreement, it might still be necessary to file for bankruptcy later on. Therefore, consulting with an attorney specializing in debt agreements is always recommended before entering into one of these contracts.

Assignment Of Debt Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10 5 exhibit1024f10qsbmay04.htm EXHIBIT 10.24 , Viewed December 20, 2021, View Source on SEC .

Who Helps With Assignment Of Debt Agreements?

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Meet some of our Assignment Of Debt Agreement Lawyers

Angela Hayden is an accomplished and driven attorney with a diverse professional background that sets her apart. Having served as a former Assistant Public Defender in Allegheny County, Angela acquired invaluable expertise in navigating the complexities of the criminal justice system. Her trial experience spans a wide range of cases, from minor retail theft to complex criminal homicide, demonstrating her ability to deliver successful outcomes for her clients. Prior to her focus on criminal defense, Angela honed her skills in public policy and political consulting through her work with both the Pennsylvania and United States House of Representatives. This experience provided her with a deep understanding of the intricacies of public policy and the ability to offer strategic guidance to clients. Angela's career also took her to a civil defense firm, where she traveled across the country, defending clients in litigation. This experience enhanced her ability to handle complex civil matters and strengthened her litigation skills. In addition to her expertise in criminal defense and civil litigation, Angela has demonstrated her proficiency in employment law, providing guidance and consultation to small businesses and non-profit organizations. Her keen insight into employment law matters ensures that businesses operate within legal boundaries while fostering a positive work environment. Furthermore, Angela is a licensed realtor, well-versed in residential real estate transactions. This additional knowledge allows her to offer comprehensive legal support to clients involved in real estate matters, ensuring their interests are protected throughout the process. Angela holds a degree from Hampton University and obtained her Juris Doctor from the University of Dayton School of Law. She is pursuing a Master of Business Administration. She is licensed to practice law in Pennsylvania and the District of Columbia, demonstrating her commitment to providing exceptional legal services in multiple jurisdictions. With her extensive experience and passion for achieving favorable outcomes for her clients, Angela Hayden is a dedicated advocate ready to guide you through your legal journey.

Successful entrepreneur and business attorney with keen insight into the challenges faced by small and medium-sized businesses. In addition to my solo practice, I have extensive experience as general counsel for highly regulated businesses where I have negotiated and drafted a wide array of contracts, conducted internal regulatory compliance, engaged in transactional work and assisted with general commercial litigation.

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What is a Notice of Assignment?

Sharon McDougall - Updated - 26th January 2024 - 2 minutes to read

Understanding a Notice of Assignment

A Notice of Assignment is used to inform debtors that a third party has ‘purchased’ their debt. The new company (assignee) takes over collection procedures, but can sometimes hire a debt collection agency to recover the money on their behalf.

There are two types of debt assignment:

Legal Assignment
Equitable Assignment

If a Legal Assignment has been made, part of the purchasing company’s obligations are to inform you of the situation via an official Notice of Assignment, and let you know that payment should be made to themselves rather than your former creditor.

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What are Legal and Equitable Assignments?

The Law of Property Act, 1925, lays down the requirements for both types of assignment. The criteria for a Legal Assignment include:

It must be made in writing (Deed of Assignment)
Notification must be sent to the borrower (Notice of Assignment)
The assignment must be absolute

Legal Assignment gives the assignee powers to enforce the debt, unlike an Equitable Assignment where the purchasing party is unable to take enforcement action in their own right.

Under an Equitable Assignment, only the amount owed is assigned, and not the original creditor’s rights and responsibilities.

What happens after a Notice of Assignment has been issued?

The Legal Assignment process ensures that all the rights and responsibilities of the original lender are adopted by the assignee. Sometimes the purchasing company has in-house collection procedures, or uses the services of a third party debt collection agency.

As far as your credit file is concerned, the company taking on the debt will notify the Credit Reference Agencies of any default once repayments have started. You’ll see a name-change on your credit record in respect to this debt. The previous company’s name should be removed, and any default will now be associated with the new creditor.

The assignee may decide to hire a debt collection agency to collect the debt in full, in which case you should respond quickly to phone calls and letters. The debt collection company may be open to negotiations for a repayment plan, rather than taking further action against you.

Are there any benefits for you if your debt is assigned?

If you were previously having difficulty in repaying your debt, you may find that the new creditor has more flexibility to freeze interest and charges, allowing you to pay off what is owed more quickly.

Agreeing a sustainable plan for repayment is in their interests as well as yours – they won’t need to take further action if you’re able to keep up the payments, and in this way receiving a Notice of Assignment can be a positive outcome.

Scotland Debt Solutions helps residents in Scotland to free themselves from debt . We offer advice and guidance on what to do if creditors are pursuing you for payment, and operate from five locations around Scotland. Call today for an initial meeting free-of-charge .

Sharon McDougall

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Assigning debts and other contractual claims - not as easy as first thought

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Harking back to law school, we had a thirst for new black letter law. Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won’t bore you with the detail, but suffice to say that what’s important is that a legal assignment must be in writing and signed by the assignor, must be absolute (i.e. no conditions attached) and crucially that written notice of the assignment must be given to the debtor.

When assigning debts, it’s worth remembering that you can’t legally assign part of a debt – any attempt to do so will take effect as an equitable assignment. The main practical difference between a legal and an equitable assignment is that the assignor will need to be joined in any legal proceedings in relation to the assigned debt (e.g. an attempt to recover that part of the debt).

Recent cases which tell another story

Why bother telling you the above? Aside from our delight in remembering the joys of debating the merits of legal and equitable assignments (ehem), it’s worth revisiting our textbooks in the context of three recent cases. Although at first blush the statutory conditions for a legal assignment seem quite straightforward, attempts to assign contractual claims such as debts continue to throw up legal disputes:

In Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm), the High Court held that a performance bond issued under a construction contract was not effectively assigned despite the surety acknowledging a notice of assignment of the bond. Sadly, the notice of assignment failed to meet the requirements under the bond instrument that the assignee confirm its acceptance of a provision in the bond that required the employer to repay the surety in the event of an overpayment. This case highlights the importance of ensuring any purported assignment meets any conditions stipulated in the underlying documents.
In Promontoria (Henrico) Ltd v Melton [2019] EWHC 2243 (Ch) (26 June 2019) , the High Court held that an assignment of a facility agreement and legal charges was valid, even though the debt assigned had to be identified by considering external evidence. The deed of assignment in question listed the assets subject to assignment, but was illegible to the extent that the debtor’s name could not be deciphered. The court got comfortable that there had been an effective assignment, given the following factors: (i) the lender had notified the borrower of its intention to assign the loan to the assignee; (ii) following the assignment, the lender had made no demand for repayment; (iii) a manager of the assignee had given a statement that the loan had been assigned and the borrower had accepted in evidence that he was aware of the assignment. Fortunately for the assignee, a second notice of assignment - which was invalid because it contained an incorrect date of assignment - did not invalidate the earlier assignment, which was found to be effective. The court took a practical and commercial view of the circumstances, although we recommend ensuring that your assignment documents clearly reflect what the parties intend!
Finally, in Nicoll v Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch), the High Court held that a notice of assignment of a debt given to a debtor was valid, even though the effective date of assignment stated in the notice could not be verified by the debtor. The case concerned a debt assigned by the Co-op Bank to Promontoria and a joint notice given by assignor and assignee to the debtor that the debt had been assigned “on and with effect from 29 July 2016”. A subsequent statutory demand served by Promontoria on the debtor for the outstanding sums was disputed on the basis that the notice of assignment was invalid because it contained an incorrect date of assignment. Whilst accepting that the documentation was incapable of verifying with certainty the date of assignment, the Court held that the joint notice clearly showed that both parties had agreed that an assignment had taken place and was valid. This decision suggests that mistakes as to the date of assignment in a notice of assignment may not necessarily be fatal, if it is otherwise clear that the debt has been assigned.

The conclusion from the above? Maybe it’s not quite as easy as first thought to get an assignment right. Make sure you follow all of the conditions for a legal assignment according to the underlying contract and ensure your assignment documentation is clear.

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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

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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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.

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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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What is an Assignment of Debt?

By Sej Lamba

Updated on 26 February 2024 Reading time: 5 minutes

When Could an Assignment of Debt Happen?

Key issues on assignment of debt, drafting the correct documentation, giving notice, key takeaways.

Debts are increasingly common in today’s financial climate, and unfortunately, many people struggle to repay what they owe. Debts owed can be sold to third parties and a lot of companies in the UK purchase debts. However, this can be complicated as specific legal formalities apply when assigning debts. This article will explain some of the critical issues around the assignment of debt.

Debt collection can be a complex process. There are various reasons as to why debt is assigned. For example, a company owed debt may want to avoid putting in time and effort to chase it or want to take legal action to recover it.

To picture a scenario, imagine this:

Joe Bloggs gets a brand-new shiny credit card. Joe purchases lots of nice things for his family with the credit card. Usually, he can keep up with payments as he keeps track of them and earns enough to pay them back;
suddenly, Joe has an injury and cannot work anymore. He has to give up his job and now can’t afford to pay the credit card company back;
Joe ignores various letters chasing the debt and hopes the problem will disappear. Ultimately, after months, the credit card company gives up and sells Joe’s debt to a debt collection agency.

So, in summary – after the debt sale, Joe now owes money to a different company.

In practice, debt assignments can be complex, and the parties must follow the relevant legal rules and draft the correct documentation.

An assignment of debt essentially transfers the debt from one party (the assignor) to a third party (an assignee).

In practice, this will mean the original debtor (e.g. Joe Bloggs) will now owe the debt to a new third-party creditor (e.g. the debt collection business). Therefore, in the scenario above, Joe must now repay the debt to the third-party debt collection business.

This process can be complex. There have been several legal cases in the courts where this process has given rise to disputes.

There are two different types of assignment of debt – a legal assignment of debt and an equitable assignment of debt.

In simple terms:

a legal assignment of debt will transfer the right for enforcement of the debt; and
an equitable assignment of debt will transfer only the benefit of the debt without the right to enforce it.

Let us explore each type below.

Legal Assignment of Debt

If the assignment complies with specific legal requirements under the Law of Property Act 1925, it will be a ‘legal assignment’. This means that the assignee will be the new owner of the debt.

A legal assignment requires various formalities to be effective. For example, it must:

be in writing and signed by the assignor;
the debtor must be given written notice of the assignment;
be absolute with no conditions attached to it;
relate to the whole of the debt and not just part of it; and
not be a charge.

After the transfer of the debt, the assignor can sue the debtor in its own name.

Equitable Assignment of Debt

It is also possible to have an equitable debt transfer – the requirements for this are much less strict. For example, this can be done informally by the assignor informing the assignee that the rights are transferred to them.

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For an equitable assignment, giving notice is not essential, but still always highly advisable.

Where an equitable assignment is made, the assignee won’t have the right to pursue court action for the debt. In this case, the assignee will have to join forces with the assignor to sue for the debt to sue for the debt.

The debtor should receive notice of any debt transfer so they know to whom the money is owed. Following notice, the new debt owner can pursue the debt owed.

A legal assignment is the best option for an assignee of debt – this will give them full rights to enforce the debt.

Assignments of debts can be very complex. For a legal assignment of debt, you need to follow various formalities. Otherwise, it may be unenforceable and lead to disputes. If you need help executing a debt assignment correctly, you should seek legal advice from an experienced lawyer.

If you need help with an assignment of debt, LegalVision’s experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page .

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Assignment of Debt – What You Need to Know

By aqila zulaiqha zulkifli ~ 23 june 2023.

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Aqila Zulaiqha Zulkifli

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Occasionally, to ensure liquidity and to reduce financial risk, a creditor may assign its rights to a debt repayment to another party. Such an arrangement is known as the assignment of debt.

An assignment generally means the transfer of contractual rights and liabilities to a third party without the concurrence of the other party to the contract. [1] The assigning party is known as the assignor, whereas the recipient party is known as the assignee.

Once an assignment occurs, the assignee stands in the exact position as the assignor and has the legal right to a debt, other remedies therein, and even the power to discharge the debt. The debtor must then, make all payments to the assignee, and not the assignor. In fact, if the debtor pays the assignor without the consent of the assignee, the debtor may risk having to pay the assignee all over again. [2]

An assignment of debt is governed by Section 4(3) of the Civil Law Act 1956 (the “Act”) (cited with approval in the Federal Court case of UMW Industries Sdn Bhd v Ah Fook [3] , in which, the elements of a statutory assignment of debt can be summarized as follows:

the assignment must be in writing under the hand of the assignor (and not, i.e the agent of the assignor);
the assignment must be absolute and not by way of charge only; and
the express notice in writing must have been given to the person liable to the assignor (i.e the debtor).

The effect of a statutory assignment is that the assignee possesses the legal right to the debt and the right to sue the debtor in respect of the debt without needing to join the assignor. [4]

However, rest assured, an assignment that is not in compliance with Section 4(3) of the Act is not automatically invalid. A non-statutory assignment could still be valid in equity [5] , though the assignee would have to join the assignor in the proceeding, either as a plaintiff or defendant [6] . This is to ensure a just disposal of the action, by ensuring that all relevant parties are before the Court so that the assignor would not make a claim against the debtor in respect of the same debt.

As such, in conclusion, before accepting an assignment of debt, it is prudent for an assignee to ensure that the elements in Section 4(3) of the Act abovementioned are fulfilled. If the assignment is meant to be absolute, such terms should be clearly reflected in the deed of assignment, or the assignee runs the risk of being crippled in a legal proceeding to recover the debt in the absence of the assignor.

[1] United General Insurance Co Sdn Bhd v Progress Credit Sdn Bhd [1988] 2 MLJ 297

[2] malayawata steel berhad v government of malaysia & anor [1980] 2 mlj 103, [3] [1996] 1 mlj 365, [4] mbf factors sdn bhd v tay hing ju (t/a new general trading) [2002] 5 mlj 536, [5] khaw poh chhuan v ng gaik peng & ors [1996] 1 mlj 761 (fc), [6] chan min swee v melawangi sdn bhd [2000] 7 clj 1.

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Assignment of debts - take care with cross-referencing

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In the recent High Court decision in Nicoll -v- Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch), the validity of an assignment of debts and the notice requirements is considered.

The High Court in this case considered whether a notice of assignment in relation to a debt, which mentioned an unverifiable date of assignment, was still valid and enforceable against the debtor.

The debt in question originally arose between the debtor and the Co-operative Bank (Bank) and was evidenced in various facility letters between September 2010 and May 2013. A sum of over £10 million was advanced by the Bank to the debtor, and security was taken by the Bank in the form of charges over certain property. The overall balance was repayable by May 2015, but the debtor defaulted on the payment terms.

On 29 July 2016, the Bank assigned (or purported to assign) its debt and security to Promontoria. Both the Bank and Promontoria provided joint notice of the assignment in a single document to the debtor on 2 August 2016, with wording that the debt had been assigned ‘on and with effect from 29 July 2016’. There was no express reference to the date of the assignment or the assignment effective date, but rather this was defined by reference to the completion date in a related but unreferenced loan sale deed, so a more complicated analysis of a series of documents was required to reach the actual date of the assignment.

Promontoria proceeded to pursue the debtor for the debt by serving a statutory demand, dated 27 January 2017, and referred to the deed of assignment within its contents for payment of the outstanding debt.

The debtor’s attempt to have the statutory demand set aside was dismissed at the initial hearing, but the debtor received leave to appeal to the High Court on one issue. The debtor sought to challenge the effectiveness of the assignment of the debt based on an inability to work out from the notice of assignment whether the completion date for assignment had actually occurred. The debtor argued that:

the case of WF Harrison -v- Burke [1956] 1 W.L.R. 419 is authority that a notice of assignment that gets the date of assignment wrong is invalid and, as a result, the assignment is not good against any debtor; and
the date of assignment stated in the notice given to him was unverifiable, and therefore potentially wrong, rendering the notice invalid

The High Court agreed that the documentation disclosed by Promontoria to the debtor after the notice of assignment was insufficient to verify the date on which assignment had occurred, due to cross-referencing to other documents and there being conditions for completion. However, the High Court distinguished this case from WF Harrison -v- Burke case as the joint notice of assignment did not specify the date of the deed of assignment. It specified the date on which the assignment took effect, which is different. In WF Harrison -v- Burke , the notice of the assignment (given by the assignee only) specified the date of the assignment document (as opposed to the assignment itself) and got it wrong. In the present case, the notice of assignment was from both Promontoria and the Bank, i.e. assignor and assignee and made clear that the parties considered the assignment to be complete. In the circumstances, the debtor was not entitled to challenge Promontoria’s title to the debt.

The High Court accepted that while Promontoria had not produced evidence which in terms showed what the effective date of the assignment was, the joint notice clearly showed that both the Bank and Promontoria agreed and accepted that the assignment had taken place, and was sufficient evidence for the present purposes to be valid. The judge said: ‘The question is not whether Promontoria have provided a chain of proof through the wording of the documents. If that were the question then Promontoria would fail. The question is whether Promontoria has demonstrated that there is a completed assignment. I consider that it has. The crucial matter is the notice of assignment, against the background of the assignment document. The assignment documentation demonstrates a clear intention to assign even if the documents do not match up as they ought to. The notice of assignment provides clear evidence that the assignment has taken place.’ Accordingly, the High Court concluded that there was no arguable case that the assignment’s effective date had not occurred and considered that the assignment had been sufficiently demonstrated to be effective as against the debtor.

The High Court clearly held that a notice of assignment of a debt given to a debtor was valid, even though the assignment effective date, referred to in the notice, could not be verified by the debtor. The judgment provides strong support for the proposition that it is not open to debtors to seek to find alleged defects in any assignment, as long as they have been properly notified of the assignment and most importantly that the assignor and assignee both agree that the assignment is valid. This is a welcome decision for all creditors.

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English law assignments of part of a debt: Practical considerations

United Kingdom | Publication | December 2019

Enforcing partially assigned debts against the debtor

The increase of supply chain finance has driven an increased interest in parties considering the sale and purchase of parts of debts (as opposed to purchasing debts in their entirety).

While under English law part of a debt can be assigned, there is a general requirement that the relevant assignee joins the assignor to any proceedings against the debtor, which potentially impedes the assignee’s ability to enforce against the debtor efficiently.

This note considers whether this requirement may be dispensed with in certain circumstances.

Can you assign part of a debt?

Under English law, the beneficial ownership of part of a debt can be assigned, although the legal ownership cannot. 1 This means that an assignment of part of a debt will take effect as an equitable assignment instead of a legal assignment.

Joining the assignor to proceedings against the debtor

While both equitable and legal assignments are capable of removing the assigned asset from the insolvency estate of the assignor, failure to obtain a legal assignment and relying solely on an equitable assignment may require the assignee to join the relevant assignor as a party to any enforcement action against the debtor.

An assignee of part of a debt will want to be able to sue a debtor in its own name and, if it is required to join the assignor to proceedings against the debtor, this could add additional costs and delays if the assignor was unwilling to cooperate. 2

Kapoor v National Westminster Bank plc

English courts have, in recent years, been pragmatic in allowing an assignee of part of a debt to sue the debtor in its own name without the cooperation of the assignor.

In Charnesh Kapoor v National Westminster Bank plc, Kian Seng Tan 3 the court held that an equitable assignee of part of a debt is entitled in its own right and name to bring proceedings for the assigned debt. The equitable assignee will usually be required to join the assignor to the proceedings in order to ensure that the debtor is not exposed to double recovery, but the requirement is a procedural one that can be dispensed with by the court.

The reason for the requirement that an equitable assignee joins the assignor to proceedings against the debtor is not that the assignee has no right which it can assert independently, but that the debtor ought to be protected from the possibility of any further claim by the assignor who should therefore be bound by the judgment.

Application of Kapoor

It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim. In respect of an assignee of part of an independent payment undertaking which is not disputed and has itself been equitably assigned to the assignee, we believe that there are good grounds that an English court would accept that the assignee is allowed to pursue an action directly against the debtor without needing the assignor to be joined, as this is likely to be a matter of procedure only, not substance.

This analysis is limited to English law and does not consider the laws of any other jurisdiction.

Notwithstanding the helpful clarifications summarised in Kapoor, as many receivables financing transactions involve a number of cross-border elements, assignees should continue to consider the effect of the laws (and, potentially court procedures) of any other relevant jurisdictions on the assignment of part of a debt even where the sale of such partial debt is completed under English law.

Legal title cannot be assigned in respect of part of a debt. A partial assignment would not satisfy the requirements for a legal assignment of section 136 of the Law of Property Act 1925.

If an assignor does not consent to being joined as a plaintiff in proceedings against the debtor it would be necessary to join the assignor as a co-defendant. However, where an assignor has gone into administration or liquidation, there may be a statutory prohibition on joining such assignor as a co-defendant (without the leave of the court or in certain circumstances the consent of the administrator).

[2011] EWCA Civ 1083

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Australia: Notices of assignment of debt – what they are and why they matter

A notice of assignment of debt is required by Queensland law when a debt is assigned to a new creditor. Issued to the debtor, it essentially documents that the debt has been transferred from the old creditor (assignor) to a new one (assignee).

It's the new creditor's responsibility to send the notice to ensure they:

Comply with the law – In Queensland, the notice of assignment of a debt should be in writing and comply with section 199 of the Property Law Act 1974 (QLD). Issuing such notice to the debtor is a precondition for the assignment becoming legally effective.
Protect their rights as a creditor – The notice of assignment needs to be issued before the new creditor can collect the debt. Failure to do so can result in the debtor continuing to make payments to the old debtor, which can lead to disputes and complications.
Protect the debtor's rights – Letting the debtor know there's a new creditor to whom they owe money avoids confusion and potential misdirection of funds.
Encourage transparency and maintain accurate records – Providing a notice of assignment fosters transparency in the debt collection process and helps maintain an accurate record of the debt's status. This latter point is particularly important during a merger, ensuring a smooth transition and avoiding future complications.

IS THERE A LIMITATION PERIOD OR ANYTHING ELSE TO BE WARY OF?

The Property Law Act 1974 (QLD) doesn't specify an exact timeframe within which a new creditor must issue a debtor a notice of assignment of debt, but there are some important time considerations to keep in mind:

Prompt notification – Despite there being no explicit time limit, it's generally recommended that the notice be provided promptly after the assignment has taken place. The key practical reason for this is to avoid the debtor making a repayment to the old creditor, which can make it tricky for the new assignee to recoup the money.
Limitation period for debt recovery – The Limitation of Actions Act 1974 (QLD) stipulates most debts have a limitation period of 6 years from the date the cause of action accrued (when the debt became due and payable). If legal action isn't commenced within this period, the creditor can lose their right to recover the debt. Providing a timely notice of assignment ensures the assignee can take legal action to recover the debt if necessary, within the limitation period.
Continuing cause of action – For some debts, such as those arising from a periodic contract or instalment payments, each missed payment can create a new cause of action. In these cases, the limitation period restarts with each missed payment. However, it's still important to provide a notice of assignment as soon as possible to avoid confusion and ensure proper debt management.

So while there's no specific limitation period for providing a notice of assignment of debt in Queensland, it's important to ensure you receive repayments from the get-go and are able to fully recoup the debt within the limitation period for debt recovery (generally 6 years).

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Deed of Assignment of Debt – Everything You Need to Know

Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

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Are you facing a ‘deed of assignment of debt’? Are you worried about a debt collector knocking on your door?

You’re in the right place. Each month, over 170,000 people visit our site looking for guidance on debt issues, just like this one.

In this article, we’ll explain:

What a ‘deed of assignment’ is
What it means for your debts
Different types of assignment
Why companies sell their debts
Ways to handle your debt situation

We know how scary it can be when debt collectors get involved; some of our team have faced similar situations. We’re here to help you understand your situation and make the best choices.

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Deed of Assignment of Debt – the basics

Being in debt is confusing enough as it is. And it can get even more complicated when you get a letter through the door from a company you may never have heard of demanding (often in quite a strongly-worded way) that you make your payments to them instead.

What’s going on, you might ask yourself?

At the end of the day, the creditor will want the money that you owe back.

However, sometimes when an account falls into arrears , they won’t have the capabilities or resources to claim it back . This is when the original company you owe money might ‘ assign’ your debt .

What is a Deed of Assignment of Debt?

This is notice that tells you that you now owe a debt collection agency or another collection service the money you originally owed to the creditor .

Instead of paying the company you might have originally owed money to, you now owe a third party company.

A deed of assignment of debt is a legal documen t alerting you of the transfer of ownership of your debt to another person. The right to receive payment from the debt you owe is transferred over to this new party as well.

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What does a Deed of Assignment of Debt mean?

A deed of assignment of debt is used to transfer or sell the right to recover a debt .

Without a deed of assignment of debt, the two companies are not able to do this – you need a written transfer document.

Once the transfer document, or deed of assignment of debt, has been signed by the assignee (the party transferring the debt) and the party receiving the debt ( assignor ), they must give notice to the debtor (the person that owes the company the sum of money).

Notice must be given within 7 days of assigning the debt. Unless someone gives notice to the debtor, then the new owner of the debt can’t enforce the debt by suing in court.

Is there more than one type of assignment?

Confusingly, there are actually two different sorts of assignment that a creditor can make. These are Legal and Equitable.

Both types of assignment fall under the Law of Property Act 1925 , and both require the creditor to inform you of the change in writing – this is known as a notice of assignment of debt .

1. Legal Assignment

Legal assignment of debt gives the company who are purchasing the debt the power to enforce it .

Basically it means that you make payments to this company instead of the original creditor, and they can send you letters and make calls to your home.

2. Equitable

If a debt is an equitable assignment, only the amount you owe is transferred , and the original creditor will still retain the original rights and responsibilities .

The purchasing company will not be able to enforce the debt either.

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Why do companies sell their debts?

A deed of assignment of debt can be a real headache, as you now have another layer of money owed. You will probably rightly ask yourself – why? And how can they sell it?

It may seem strange and confusing, but it’s actually completely legal for them to sell your debt . When you sign a credit agreement, there is almost always a clause in fine print that states that the original creditor has the power to assign their rights to a third party.

As you have signed this agreement, they don’t actually need to ask for your permission to assign your debt.

This also means that you cannot dispute it or make a complaint about it either. The only exception to this rule is if you have given evidence of mental health issues .

» TAKE ACTION NOW: Fill out the short debt form

Deed of Assignment of Debt – next steps

So that’s the basics about a Deed of Assignment of Debt. But what does this mean for you?

If your creditor passes one of your debts onto a third party company or debt collection agency, it will be officially noted that this new company is now responsible for collection .

You will be able to see this change on your credit report , and any defaults will also be registered in their name too.

While it certainly adds another layer of confusion to proceedings and you may be unsure of what’s going on when you find out about a deed of assignment of debt, it can occasionally be a bit of a blessing in disguise.

You may find it much easier dealing with the new company, as they could be more flexible when it comes to discussing interest and additional charges.

There is also the likelihood that these companies actually specialise in collecting debts , and so know how to approach you as the customer with more tact and delicacy than the original creditor.

Is there something missing? We’re all ears and eager to improve. Send us a message and let us know how we can make our article more useful for you.

You can email us directly at [email protected] to share your feedback.

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COMMENTS

Debt Assignment: How They Work, Considerations and Benefits
Debt Assignment: A transfer of debt, and all the rights and obligations associated with it, from a creditor to a third party . Debt assignment may occur with both individual debts and business ...
Notice of Assignment: Debt Terms explained
A Notice of Assignment, in relation to debt, is a document used to inform debtors that their debt has been 'purchased' by a third party. The notice serves to notify the debtor that a new company (known as the assignee) has taken over the responsibility of collecting the debt.
Assignment Of Debt: Definition & Sample
Assignment of debt is an agreement that transfer debt, rights, and obligations from a creditor to a third party. Assignment of debt agreements are commonly found when a creditor issues past due debt to a debt collection agency. The original lender will be relieved of all obligations and the agency will become the new owner of the debt.
What is an Assignment of Debt?
An assignment of debt, in simple terms, is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt. Once a debt is properly assigned, all rights and responsibilities of the original creditor (the assignor) transfer to the new owner (the assignee).
Debt Assignment: Understanding the Mechanics, Risks, and ...
Debt assignment is a strategic maneuver in the financial landscape, involving the legal transfer of debt and associated rights from a creditor to a third party, often a debt collector. ... This shift triggers the issuance of a notice of assignment (NOA), a formal communication to the debtor, signaling a change in the entity responsible for ...
Debt Collection Defense: Requiring That the Collector Document ...
On June 12, 2017, the Supreme Court decided Henson et al. v. Santander Consumer USA Inc., a case that sought an answer to whether a debt buyer must abide by the collection rules outlined in the FDCPA. The Court concluded that the owner of a debt isn't a debt collector under the Act. While the Court's holding seems straightforward, the Court ...
Assignment Of Debt Agreement: Definition & Sample
An assignment of debt agreement is a legal document between a debtor and creditor that outlines the repayment terms. An assignment of debt agreement can be used as an alternative to bankruptcy, but several requirements must be met for it to work. In addition, if obligations are not met under a debt agreement, it might still be necessary to file ...
Assignment for the Benefit of Creditors: Effective Tool for Acquiring
The assignment process enables the assignee to sell the assignor's assets free of the unsecured debt that burdened the company. Unlike bankruptcy, where the publicity for the company and its officers and directors will be negative, in an assignment, the press generally reads "assets of Oldco acquired by Newco," instead of "Oldco files ...
Factoring Notice of Assignment (NOA): What You Should Know
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 is a Notice of Assignment?
A Notice of Assignment is used to inform debtors that a third party has 'purchased' their debt. The new company (assignee) takes over collection procedures, but can sometimes hire a debt collection agency to recover the money on their behalf. There are two types of debt assignment: Legal Assignment. Equitable Assignment.
Assigning debts and other contractual claims
Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won't bore you with the detail, but suffice to say that what's important is that a legal assignment must be in writing and signed by the assignor ...
Deed of Assignment and the Notice of Assignment -What is the Difference
Summary. 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.
Assignments: why you need to serve a notice of assignment
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.
What is a Notice of Assignment in Factoring Transactions?
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.
Notice of Assignment of Debt Template
A notice of assignment of debt is a written document issued by a creditor to inform a debtor that they have legally transferred or assigned the rights of debt collection to another party, such as a collection agency or another creditor. Its purpose is to notify the debtor of the change in ownership of the debt.
What is an Assignment of Debt?
An assignment of debt essentially transfers the debt from one party (the assignor) to a third party (an assignee). In practice, this will mean the original debtor (e.g. Joe Bloggs) will now owe the debt to a new third-party creditor (e.g. the debt collection business). Therefore, in the scenario above, Joe must now repay the debt to the third ...
Deeds of Assignment of a Debt
But you need to do so in writing. A deed of assignment of a debt is the document to use for this. You would need to assign the whole of a debt, as you cannot assign only part of it. The debtor cannot assign the debt to someone else unless the creditor agrees and you would then do this via a deed of novation. 2.
Assignments: why you need to serve a notice of assignment
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 ...
Assignment of Debt
the express notice in writing must have been given to the person liable to the assignor (i.e the debtor). ... As such, in conclusion, before accepting an assignment of debt, it is prudent for an assignee to ensure that the elements in Section 4(3) of the Act abovementioned are fulfilled. If the assignment is meant to be absolute, such terms ...
Assignment of debts
The High Court in this case considered whether a notice of assignment in relation to a debt, which mentioned an unverifiable date of assignment, was still valid and enforceable against the debtor. The debt in question originally arose between the debtor and the Co-operative Bank (Bank) and was evidenced in various facility letters between ...
Notice of Assignment of Debt
A notice of assignment of debt that is described as 'equitable,' means that only the amount owed by you to the original creditor is transferred to the third party, or debt collection agency. In these instances, the company that purchases the debt cannot enforce it , and the original creditor will still retain their original rights and ...
English law assignments of part of a debt: Practical considerations
It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim.
Notices of assignment of debt
Issuing such notice to the debtor is a precondition for the assignment becoming legally effective. Protect their rights as a creditor - The notice of assignment needs to be issued before the new creditor can collect the debt. Failure to do so can result in the debtor continuing to make payments to the old debtor, which can lead to disputes ...
Deed of Assignment of Debt
Both types of assignment fall under the Law of Property Act 1925, and both require the creditor to inform you of the change in writing - this is known as a notice of assignment of debt. 1. Legal Assignment. Legal assignment of debt gives the company who are purchasing the debt the power to enforce it.

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[1] United General Insurance Co Sdn Bhd v Progress Credit Sdn Bhd [1988] 2 MLJ 297

Assignment of debts - take care with cross-referencing

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