notice of assignment a

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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FAC Number: 2023-04 Effective Date: 06/02/2023

32.805 Procedure.

(a) Assignments.

(1) Assignments by corporations shall be-

(i) Executed by an authorized representative;

(ii) Attested by the secretary or the assistant secretary of the corporation; and

(iii) Impressed with the corporate seal or accompanied by a true copy of the resolution of the corporation’s board of directors authorizing the signing representative to execute the assignment.

(2) Assignments by a partnership may be signed by one partner, if the assignment is accompanied by adequate evidence that the signer is a general partner of the partnership and is authorized to execute assignments on behalf of the partner-ship.

(3) Assignments by an individual shall be signed by that individual and the signature acknowledged before a notary public or other person authorized to administer oaths.

(b) Filing. The assignee shall forward to each party specified in 32.802 (e) an original and three copies of the notice of assignment, together with one true copy of the instrument of assignment. The true copy shall be a certified duplicate or photostat copy of the original assignment.

(c) Format for notice of assignment. The following is a suggested format for use by an assignee in providing the notice of assignment required by 32.802 (e).

Notice of Assignment

To: ___________ [ Address to one of the parties specified in 32.802 (e) ].

This has reference to Contract No. __________ dated ______, entered into between ______ [ Contractor’s name and address ] and ______ [ Government agency, name of office, and address ], for ________ [ Describe nature of the contract ].

Moneys due or to become due under the contract described above have been assigned to the undersigned under the provisions of the Assignment of Claims Act of1940, as amended, ( 31 U.S.C.3727 , 41 U.S.C.6305 ).

A true copy of the instrument of assignment executed by the Contractor on ___________ [ Date ], is attached to the original notice.

Payments due or to become due under this contract should be made to the undersigned assignee.

Please return to the undersigned the three enclosed copies of this notice with appropriate notations showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of the addressee.

Very truly yours,

__________________________________________________ [ Name of Assignee ]

By _______________________________________________ [ Signature of Signing Officer ]

__________________________________________________ [ Titleof Signing Officer ]

__________________________________________________ [ Address of Assignee ]

Acknowledgement

Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They were received ____(a.m.) (p.m.) on ______, 20___.

__________________________________________________ [ Signature ]

__________________________________________________ [ Title ]

__________________________________________________ On behalf of

__________________________________________________ [ Name of Addressee of this Notice ]

(d) Examination by the Government. In examining and processing notices of assignment and before acknowledging their receipt, contracting officers should assure that the following conditions and any additional conditions specified in agency regulations, have been met:

(1) The contract has been properly approved and executed.

(2) The contract is one under which claims may be assigned.

(3) The assignment covers only money due or to become due under the contract.

(4) The assignee is registered separately in the System for Award Management unless one of the exceptions in 4.1102 applies.

(e) Release of assignment.

(1) A release of an assignment is required whenever-

(i) There has been a further assignment or reassignment under the Act; or

(ii) The contractor wishes to reestablish its right to receive further payments after the contractor’s obligations to the assignee have been satisfied and a balance remains due under the contract.

(2) The assignee, under a further assignment or reassignment, in order to establish a right to receive payment from the Government, must file with the addressees listed in 32.802 (e) a-

(i) Written notice of release of the contractor by the assigning financing institution;

(ii) Copy of the release instrument;

(iii) Written notice of the further assignment or reassignment; and

(iv) Copy of the further assignment or reassignment instrument.

(3) If the assignee releases the contractor from an assignment of claims under a contract, the contractor, in order to establish a right to receive payment of the balance due under the contract, must file a written notice of release together with a true copy of the release of assignment instrument with the addressees noted in 32.802 (e).

(4) The addressee of a notice of release of assignment or the official acting on behalf of that addressee shall acknowledge receipt of the notice.

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What Is A Notice Of Assignment In The Trucking Industry?

Written by bobtail

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. Try it free with a seven-day trial.

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 for a free Bobtail trial 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].

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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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What is a Notice of Assignment?

Last Updated on February 16, 2023

If you’re a business owner considering invoice factoring, the Notice of Assignment (NOA) may cause you some concern. What will my customers think? Why is it necessary? Can we skip sending it? Let’s address these questions to clarify what the NOA covers and put to rest any lingering apprehension.

What is a Factoring Notice of Assignment?

The notice of assignment (NOA) informs your customer that a third party (bank, financing company, or factoring company) will manage and collect your accounts receivable (AR) going forward. The NOA arrives in the mail in the format of a letter, as the initial communication notifying your customers of the change in structure and process.

What Will My Customers Think?

Tremendous growth in the use of invoice factoring across many industries has made factoring more common than ever. According to the Global Factoring Market 2016-2020 report, analysts expect factoring to grow over 10% annually for the next several years.

Many of our factoring clients work with Fortune 500 companies who simply demand longer payment terms in order to do business. Clients using invoice factoring often show an appetite for accelerating growth and more efficiently managing operations and collections.

In short, you are most likely more concerned about it than your customers. Factoring is a widely used and acceptable means for financing your business.

Why is a Notice of Assignment Important?

In a factoring relationship, a business sells the future collection of accounts receivable (AR) in exchange for cash advances. So, the asset (future AR) belongs to the third party upon completion of the work or delivery of the goods. The business receives the cash advance and the third party waits for payment by the business’ customer.

Mildred Glaze, Senior Account Manager at altLINE, explains further, “The factor sends out the notice of assignment to be sure they place their client’s customers on notice to submit all payments to the factor and not to their client. The factor will essentially become their client’s accounts receivable department, documenting invoices and payments.”

Due to the intangible nature of AR, the third party provider needs legal language showing ownership of the AR. Thus, the legal language found in the NOA minimizes the risk placed on the third party provider. Third party providers require a NOA. It is critical to the structure of the factoring relationship and protects the third party provider in the event of misdirected payments.

In the case of a redirected payment, Mildred explains, “If a payment is in inadvertently sent to the client [instead of the factoring company], then the client turns around and forwards/sends the original method of payment to the factor…We then turnaround and re-notify that particular customer to have them confirm updating the remittance in their system.”

What is Covered in a Notice of Assignment?

The main points covered in a Notice of Assignment include:

• Business’ accounts receivable has been assigned and is payable to a third party provider
• Updated payment address, typically a lock box
• Liability on the customer in the event of misdirected payment

How We’re Different

By working with altLINE, your customers recognize the reliability and stability of your financing partner. Rather than receiving an NOA from an unknown entity or independent financing company, the bank’s reputation as the lender of choice strengthens your customer relationship.

Read our article on the benefits of factoring through a bank for more information or get a free quote today!

What does a notice of assignment mean in trucking?

A notice of assignment (NOA) is a document that notifies your customers that your factoring company has the right to collect payments on invoices. In a factoring relationship, a business sells its invoices to a third party factoring company, which then collects payment on them. An NOA notifies your customers of this change in structure.

Who provides a notice of assignment?

Grey was previously the Director of Marketing for altLINE by The Southern Bank. With 10 years’ experience in digital marketing, content creation and small business operations, he helped businesses find the information they needed to make informed decisions about invoice factoring and A/R financing.

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Sample Notice-of Assignment Letter

• by  emily
• March 7, 2012
• No Comments

From: [Your Name, & Address here]

[Recipient Name & address here]

[Date here]

Dear [name], You are hereby notified that on [date of Assignment], we allocated and shifted our interest in the matter mention below to [Assignee name].

This assignment involves –

–         [Describe in brief what has been assigned] – You are requested to send any future notices, payments or queries regarding this matter to [Assignee name] at [address of Assignee].

[Your name]

Encl: [Enclosures List here]

  Download Sample Notice-of Assignment Letter In Word Format

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• Practical Law

Notice of Assignment

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

• General Contract and Boilerplate
• United States

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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Notice of Assignment: Debt Terms explained

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A Notification of Assignment is employed to notify debtors that a third party has ‘acquired’ their debt. The new company (assignee) assumes responsibility for the collection processes, occasionally engaging a debt collection agency to retrieve the funds on their behalf.

2nd May 2019

A creditors’ main goal is to lend you money and to collect it, so they’re not the biggest fan of chasing those who fall into arrears. As such, sometimes they’ll pass arrears on to other companies.

Being in debt can get confusing as it is, but especially so if a situation arises where you owe money to your mortgage lender, then a letter comes through your door from a company you’ve never heard of asking you to make payments to them instead.

This is what’s known as a Notice of Assignment (NOA) . They are sent to inform you that a third party has bought a debt that you owe from the company you borrowed it from.

If your debt is assigned to a new owner, they will then take over the previous company’s responsibility for debt collection and will sometimes hire a collection agency to work on their behalf.

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What is a notice of assignment

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.

This means that the debtor should direct their future payments and communications regarding the debt to the assignee instead of the original creditor. T

he assignee may choose to handle the debt collection procedures themselves or may engage a debt collection agency to recover the outstanding amount on their behalf.

Types of assignment

There are two types of assignment that a creditor can make – Legal and equitable.

Both of them fall under the Law of Property Act 1925 and both require the creditor to notify you of the change in writing.

It also isn’t possible to assign only part of a debt to a third party. If a creditor is ‘selling’ your debt, they have to sell the debt as a whole, and that debt will become one of the purchasing company’s obligations.

We set out the differences between legal and equitable assignments below.

A legal assignment gives the purchasing party the power to enforce the debt. You will also then make payments to this company instead of the original creditor.

When a debt goes through an equitable assignment, it is only the amount owed that is transferred.

In these instances, the purchasing company cannot enforce the debt and the original creditor will still retain their original rights and responsibilities.

Why do creditors sell debts?

One of the most common questions asked when a notice of assignment is received is why? Why have they sold it and how can they?

The answer is that is it is actually perfectly legal for them to sell your debt to another company.

When you sign a credit agreement there will have been a clause within the fine print. This will have stated that they are able to assign their rights to a third party .

As you have signed for this, they do not need to ask your permission to ‘sell’ the debt and you are unfortunately unable to dispute it.

The only exception to this rule is if the lender pledges to the Standards of Lending Practice and you have given evidence of mental health issues previously.

In these instances, your debt should not have been sold and you should seek advice on this.

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“I’d like to say a massive thank you to Carrington Dean for helping me. It feels like I have control of my life again.”

What does a notice of assignment mean for you?

If a creditor passes one of your debts to a third party, they will notify the credit reference agencies that they are now responsible for the collection.

The previous company’s name will be removed from your credit file and that any defaults will also be registered in their name.

Many people often find that having a debt being passed to a third party is a blessing in disguise.

The new company might be easier to deal with or be more flexible. They may offer to freeze interest on your debts, for example, giving you more scope to repay what you owe more quickly.

Ultimately, getting your debt paid off is in both yours and the creditors best interests.

Agreeing to a manageable payment plan gives you some breathing space and it can often mean they won’t need to take any further action against you.

It’s also worth noting that this also does not reset the six-year period for the debt to become statute-barred and debts that are already in this category will remain as such.

Assignment and debt collection agencies

Sometimes, the purchasing company will employ a debt collection agency to act on their behalf or the debt will be purchased by an agency themselves

They will take over the full rights to the debt and attempt to collect it from you in full.

As such, they will contact you by letter, phone calls, texts or emails. It also means that they can take further action against you should you continue to default on the account.

However, unless it is stated otherwise, debt collection agencies only work on behalf of a company.

The purchasing company will still own the debt, although some collection agencies do deal in debt purchasing also.

It’s also important to remember that although they can contact you for payment, they still have to abide by creditor etiquette.

They cannot pretend to have certain legal powers or lie to you, break data protection laws or search for you on social media.

You’ll likely find that debt collection agencies are often open to negotiations, so it is always best to contact them as soon as possible when they contact you for payment.

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Assignment and debt solutions.

If you are already in some form of debt solution such as an IVA , Trust Deed or a DMP that is run privately by a company, you must notify the company running your agreement.

They will make the necessary updates to their records and contact the company to arrange payment to the new company.

If you are managing your own debts, you will need to cancel any payment to the original company and set up a new one to the purchasing company or debt collection agency.

In this instance, you may be asked to show them an up to date state of affairs in case any changes need to be made.

If you’re receiving notices of assignment and struggling with debt collection, call us today. A qualified adviser will be on hand to give you free confidential advice and help you find the right solution for your debts.

KEY TAKEAWAYS

• Creditors often transfer arrears to other companies to handle debt collection.
• A Notice of Assignment (NOA) informs debtors that their debt has been purchased by a third party.
• The assignee, the new company, assumes responsibility for collecting the debt.
• Debtors should direct future payments and communication regarding the debt to the assignee.
• The assignee may handle debt collection internally or engage a debt collection agency.

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed's, and various other debt solutions.

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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.

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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.

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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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. 

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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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