Can They Contact My Customers? 6 Rules on UCC Lien Notification

Yes, through defined notices and within defined limits, a funder can redirect what customers pay.

Customer contact in this market is rarely casual. It runs through assignment notices, lien filings, and collection letters, each governed by rules that decide who a customer may pay, what a notice must contain, and how the redirection ends. Six rules below govern the encounter.

Notice Redirects Payment After Receipt

When receivables are assigned, the customer may keep paying the merchant until proper notice arrives, and after receipt the customer may discharge the obligation only by paying the assignee. The rule, if precision matters, turns entirely on receipt of a signed notification directing payment to the new party, as stated in the notice of assignment rule.

Until that receipt arrives, no redirection has occurred, and payment to the merchant still satisfies the debt. The notice is the lock on the flow, and the flow moves only when the lock is set in compliance with the rule.

The Notice Must Identify the Rights Assigned

A vague letter claiming an interest changes nothing. Notification is ineffective unless it reasonably identifies the rights assigned, and upon the customer’s request the assignee must seasonably furnish reasonable proof of the assignment, failing which the customer may continue paying the merchant.

One captured MCA agreement authorized debits of fifteen percent of daily revenue capped at two thousand four hundred ninety nine per week, which shows the level of specificity these papers can carry when drafted with care. Owners should demand the same specificity from any notice sent to their customers. A notice that cannot name the rights cannot redirect them.

Why Restraints on Assignment Fail

Terms between a customer and the merchant that purport to prohibit assignment of receivables, or to treat assignment as a default, are ineffective to that extent under the same article. The statute favors the free movement of receivables over private restraints.

The exception proves narrow.

The Lien Survives Sale and Reaches Proceeds

Under New York law a security interest continues in collateral despite disposition unless the secured party authorized a free and clear transfer, subject to statutory exceptions, and it attaches to identifiable proceeds, as provided in the collateral disposition rule.

A customer who pays the merchant after proper notice has not paid the debt. The debt waits with the assignee, and it accrues the patience of paperwork.

A filed financing statement likewise remains effective as to sold collateral in which the interest continues, even where the secured party knew of the disposition. Selling the business, rerouting customers, or changing processors does not by itself extinguish the lien. Authorization, releases, and statutory exceptions are separate inquiries, and counsel should confirm each before any party relies on a bill of sale to defeat a filing.

Commercial Collection Carries No Consumer Validation Right

Customers and owners alike sometimes expect the validation and cease contact machinery of consumer collection law. That machinery covers specified consumer debts rather than business obligations, with original creditor collection outside its scope, per the federal guidance on collection limits (which collectors citing routine notice practice will seldom volunteer, since the absence of a consumer style dispute right favors the party sending notices rather than the party receiving them).

Federal enforcement in this market documented collectors using unauthorized withdrawals and threats to seize assets, ending in an industry ban and orders to release liens, as described in the federal order against abusive MCA providers. Every notice should be preserved. The record of what was sent, and when, often decides what follows.

Settlement Must End the Notices in Writing

You pay the wrong party after notice and you pay twice. Ending the redirection therefore requires more than a handshake: termination statements for the lien filings, written confirmation that assignment notices are withdrawn, and proof of each filing from the office of record.

The termination duty runs within twenty days after a signed debtor demand when the statutory conditions hold, per the termination procedure for financing statements. Delancey Street is a settlement company. Legal work, where the file requires it, is handled by independently licensed counsel. A confidential initial review with Delancey Street ensures the only lock that matters at the end is a filed termination. Notice opens the redirection. Paper closes it.