A notice of assignment (often abbreviated NOA) is a written notice sent to a customer stating that the seller's right to payment has been assigned to a factor, and instructing the customer to pay the factor going forward.
How it works in factoring
The notice is usually sent at the start of a factoring relationship, either by the factor or on the seller's letterhead. A clear notice typically includes:
- The names of the seller and the factor
- A statement that current and future invoices are assigned
- New remittance details, such as a lockbox address or bank account
- A request that the customer update its vendor records and sign an acknowledgment
Under UCC Article 9, a customer that receives an authenticated notice reasonably identifying the assigned rights, and directing payment to the assignee, generally can discharge its obligation only by paying the assignee. A customer that pays the seller after receiving such notice may have to pay a second time. The customer can ask for reasonable proof of the assignment, and if proof is not given it may keep paying the seller.
Different rules apply to federal government contracts, which fall under the Assignment of Claims Act, and to Medicare receivables.
What to check
- That the notice names the correct legal entity of each customer
- That it reaches the accounts payable department, not just a buyer or project manager
- That signed acknowledgments are kept on file
- How the notice will be released when the factoring relationship ends