Yes, if your MCA agreement says so, or once you've defaulted. If your customers keep paying you after they receive the notices, they haven't paid, and they may have to pay the MCA funder.
Can an MCA funder send UCC 9-406 notices to my customers?
If the agreement so provides, or once you've defaulted, a funder can send notices to your customers (account debtors) directing them to pay the MCA funder (assignee) instead of you (assignor). UCC 9-607(a) lets a secured party notify account debtors to pay it "if so agreed, and in any event after default."
Once your customer receives the MCA funder's signed notice, UCC 9-406(a) says your customer "may not discharge the obligation by paying the assignor."
Under the 2022 UCC amendments (effective in Pennsylvania on August 30, 2024, and in New York on June 3, 2026), "assignee" means a "secured party" or a "buyer" of accounts. So, even if your MCA funder is merely making a loan, it qualifies as an assignee in both states.
What makes a UCC 9-406 notice from an MCA funder valid?
A valid notice must be signed by the assignor or assignee and meet each of these requirements:
| Requirement | Source | If it's missing |
|---|
| Signed by the assignor or assignee | 9-406(a); Official Comment 2 to 9-406 | Letterhead is sufficient. The revised 9-406 uses "signed" instead of "authenticated." |
| Reasonably identifies the assigned rights | 9-406(b)(1) | The notice is ineffective. There are no magic words required. |
| Directs the full installment to the MCA funder | 9-406(b)(3), (g) | The account debtor may treat the notice as ineffective and cannot give up this option. |
| Received by the account debtor | UCC 1-202(e), (f) | A business is charged with notice once due diligence would have routed it to the right person. |
| Proof of the assignment furnished upon request | 9-406(c) | The account debtor discharges the obligation by paying the assignor. |
MCAs only purchase a percentage of your receipts. In Merchant Advance v. Conceptos Cuisine (2026), the MCA funder paid $25,000 for $34,750 of the merchant's future receipts, collected at $289.58 per day. A notice directing your customer to pay only a portion of an invoice to the MCA funder is subject to UCC 9-406(b)(3). A demand for 100% of the payment is not. Whether that overreaches depends on whether the funder also took a security interest in all of your accounts.
What happens if my customer pays me after receiving a UCC 9-406 notice?
Your customer hasn't paid, and may have to pay the MCA funder. In IIG Capital v. Archipelago (N.Y. 2007), the New York appellate court held that a $3.1 million settlement the customers paid to the assignor was no defense if the accounts were assigned and properly noticed. Similarly, in First State Bank v. MP Nexlevel (Neb. 2020), the Nebraska Supreme Court held that a customer breached its obligations to the assignee bank by paying the assignor $412,302.59 after the bank's notices.
The funder may also collect from whoever got paid. See Nationwide Transport Finance v. Cass, where the Ninth Circuit noted that an assignee could pursue whoever received an errant payment. See also Can an MCA company take money directly from my customers?
Does it matter that you dispute the default or the funder isn't in first position?
Even if you think you didn't default, your customers cannot continue paying you. In Nexlevel, the Nebraska Supreme Court held that the assignor's belief that it did not default "does not change the facts." "Default" is whatever the security agreement says it is, and whether you've defaulted is for you and the MCA funder to reconcile.
9-406(a) has no seniority element, and Official Comment 2 agrees: "Nothing in this section conditions the effectiveness of a notification on the identity of the person who gives it." The UCC-1 filing is not the source of the right either, as the security interest attached under UCC 9-203, and the filing only established priority.
Does it matter if your MCA calls itself a purchase of receivables?
Barely. UCC Article 9 governs the purchase of receivables too (UCC 9-109). But if it is a purchase, not a secured loan, UCC 9-608(b) says that the seller is not entitled to a surplus from collections, and UCC 9-209(c) excludes the sale of accounts from the statutory release requirement. Note that if a court recharacterizes the transaction, the funder retains the security interest.
What can your customer demand before redirecting payment?
Your customer can require the MCA funder to provide reasonable proof of the assignment, and until the funder seasonably provides it, paying you still discharges the debt. You cannot make this demand; only your customer can. The statute sets no number of days for "seasonably." Courts hold a failure to ask against the customer, as IIG did, noting that the defendants "made no such request."
Your customer can also raise defenses pursuant to UCC 9-404(a), but these can only reduce the amount owed.
Which customers does a 9-406 notice not reach the same way?
- Consumers buying for personal, family, or household purposes, since UCC 9-406(h) defers to other law setting a different rule.
- Health insurers paying health care insurance receivables, per UCC 9-406(i).
- Federal government agencies pursuant to the Assignment of Claims Act, which restricts assignments to financing institutions on contracts of $1,000 or more and requires written notice filed with the agency.
- Payment agents and outsourced payables services, as held in Nationwide v. Cass, but note that the customer is still bound.
A UCC 9-406 notice does not reach your bank account, as "deposit accounts" are excluded from the definition of "account" in UCC 9-102(a)(2), so the double payment rule does not apply.
To withdraw a defective or premature UCC 9-406 notice, see How to Stop MCA Notification of Assignment Letters.
Frequently Asked Questions
Can a no-assignment clause in my customer contract block the notice?
No, per UCC 9-406(d), a term in a contract with your customer prohibiting, restricting, or causing a default by assignment is ineffective, so your customer cannot use it to refuse a valid notice.
What if two MCA funders send notices about the same invoices?
The law is unclear, but your customer can demand proof of assignment from each under UCC 9-406(c). Interpleader may help where your state permits it, while priority between the funders is decided under UCC 9-322.
When does my customer's duty to pay the funder end?
For secured transactions, when there is no amount owing and no further commitment to advance, the MCA funder must send a signed notice of release to each of your customers it notified within 10 days of your signed demand pursuant to UCC 9-209(b). UCC 9-209(c) exempts true purchases of accounts, so in that case it depends on your contract with the MCA funder.