Can an MCA Collect From My Customers Without a Court Order?
Yes. Under the Uniform Commercial Code, “if so agreed, and in any event after default, the secured party may notify an account debtor… to account or pay the secured party and may enforce rights with respect to the payment.” UCC § 9-607(a). If your MCA agreement so provides, the Funder can send notices to your customers before default. An MCA funder is a secured party who has bought your receivables. Since the 2022 amendments, an Article 9 “assignee” includes a buyer of accounts.
Although the UCC-1 filing determines priority among creditors, the notice of assignment flows from the agreement and UCC 9-607. Once the customer receives the notice, UCC 9-406(a) requires the customer to pay the Funder and not you in order to discharge its debt. Read more about what the notice must contain. (Read more about settlements with the credit card processors.)
What Happens if a Notified Customer Pays You Anyway?
The customer would be liable to pay again. In GMAC v. Clifton-Fine (N.Y. 1995), the New York Court of Appeals said a customer that keeps paying the assignor after notice “is liable to the assignee and the fact that payment was made to the assignor is not a defense.” See IIG Capital v. Archipelago (N.Y.App.Div.2007) (Archipelago’s customers had already paid $3.1 million to the assignor on the same accounts, and this “would not be a defense” if notice had been properly given); First State Bank Nebraska v. MP Nexlevel (Neb. 2020) (the customer paid MPN $412,302.59 after the May 2018 notice while MPN disputed the default; the dispute did not excuse the customer, and the court reversed its win, leaving it exposed to the full amount).
If your customer is forced to pay again, it will have a claim against you for the first payment, making it another creditor of yours. Otherwise, your customer may set off future invoices with you for that first payment.
Why Didn’t My Customer Pay Anyone When It Got the Notice of Assignment?
Your customer likely froze its payment to you and the MCA Funder because that was safest for it. In April 2026, a merchant-side consultant reported to the ABF Journal that most customers do not redirect payment but freeze payment. Your customer can also delay payment. It can:
- ask the MCA Funder for proof of the assignment, UCC 9-406(c) (“If reasonable proof of the assignment is not seasonably furnished, the account debtor may pay the assignor….”);
- write a joint check to you and the MCA Funder (which the Nebraska Supreme Court called a “very simple expedient”); or
- file an interpleader, where your customer would pay the money into court and then let you and the MCA Funder litigate who gets the money.
None of these approaches are speedy, and the statute does not say how many days “seasonably” gives the MCA Funder to produce proof of the assignment to your customer. Until your customer pays, neither you nor the MCA Funder will receive the money.
How Much Is the Loss When the Funder Sends a 9-406 Notice?
The MCA agreement entitles the Funder to a certain percentage. When the MCA Funder sends a UCC 9-406 notice to a customer, it is entitled to all of that customer’s invoices. Using a hypothetical of a customer paying you $20,000 per month and a 15% holdback:
| Stage of Notification | Amount Funder Received | Amount You Received |
|---|
| Prior to Notification | $3,000 | $17,000 |
| Upon Customer’s freezing their payment to you in order to verify | $0 | $0 |
| Upon Customer’s paying the Funder | $20,000 | $0 |
Does Every Redirected Dollar Come Off My Balance?
Not necessarily. If the transaction is a loan secured by your accounts, UCC 9-608(a)(1) and 9-607(d) require the secured party to apply the funds to any collection cost and attorney’s fees (if your agreement allows them) and then to “account to and pay a debtor for any surplus.” However, if the transaction is a sale of accounts, UCC 9-608(b) provides that you are not entitled to any surplus.
This matters when a large invoice meets a small remaining balance. For example, in a 2026 Puerto Rico case, the funder advanced $25,000 and was to be paid out of future receipts of $34,750 at $289.58 per day. When suit was filed, the merchant had paid $14,190.00. A single redirected invoice could exceed the remaining balance owed. Whether the funder would have to return the excess would be based upon the specific language of the contract and applicable state law. You should insist that the factor provide you an accounting, in writing, of the funds they have received from your customers.
How Will My Customers Know to Resume Paying Me?
In most cases, you will have to provide them a release as part of your payoff or settlement documents. Although UCC 9-209(b) requires a paid-off secured party to send releases to each notified customer within 10 days of receipt of your signed demand, that section does not apply to sales of accounts (most MCA’s are structured as sales of accounts), see UCC 9-209(c). Further, the factor is only required, upon termination of its UCC-1 financing statement, to file a UCC-3 termination statement with the state or to send it to you, see UCC 9-513, which only ends the UCC-1’s effect. You can, however, force the MCA company to withdraw its notification of assignment.
Frequently Asked Questions
What if I have two funders who have sent notifications of assignment to my customers? Do they cancel each other out?
No. The priority between the funders is governed by UCC 9-322. The customer can always request proof from each of the funders or file an interpleader action to pay the money into court.
My agreement is for only 15% of my accounts, can they notify my customers of the entire invoice?
Yes, and if the notification of assignment does not include the entire installment, the customer can treat the notice as ineffective, see UCC 9-406(b)(3).
What if I have customers who have prepaid or have credits with me?
The factor only receives your account subject to the terms of your agreement with your customer and any claim which accrued prior to the customer receiving the notice of assignment, see UCC 9-404(a). The credits will act as a reduction to the amount the factor can collect, but cannot be asserted as a claim for money against the factor.
Are there any exceptions to UCC 9-406, such as government accounts, consumer accounts, insurance companies, etc?
Yes. The section defers to other law for consumers and does not apply to health-care-insurance receivables. Further, federal agencies are governed by the Assignment of Claims Act, which requires certain filings which the factor’s notice alone is unlikely to comply with.