I got a letter telling me to pay my vendor's funder instead. What do I do?

Written for the customer receiving the notice as well as the business whose receivables were interrupted.

What is a UCC 9-406 notice?

A notification that your vendor assigned its right to payment, directing you to pay the assignee instead. No lawsuit is required and no court reviews it.

It works by changing who your payment discharges. That is the entire mechanism, and it is why a letter with no case number carries real consequences.

What makes a notification effective?

Under New York's current 9-406, the notification must be signed by the assignor or assignee, state that the amount due or to become due has been assigned, direct payment to the assignee, and reasonably identify the rights assigned.

Reasonable identification is the standard. Invoice-by-invoice itemization is not always required, but a notification that does not reasonably identify what was assigned is worth questioning.

Can I ask for proof before I redirect payment?

Yes. Under 9-406(c) you may request reasonable proof that the assignment was made. If the assignee does not seasonably furnish it, you may discharge the obligation by paying the assignor.

"Seasonably" is the standard, not a fixed number of days. Make the request in writing and document when you sent it.

What happens if I pay the wrong party?

You can be required to pay again. A payment to your vendor after an effective notification does not discharge the obligation to the assignee.

Your defenses and claims against the vendor under 9-404 travel with the obligation and are not erased by the assignment.

I received notices from two different companies for the same vendor. Who do I pay?

Do not guess. Payment to the party actually entitled to it does discharge the obligation, but payment to the wrong claimant may not, and the letters will not tell you which is which.

Request reasonable proof from each. Priority between competing perfected security interests generally follows first to file or perfect under 9-322, subject to numerous special rules. Interpleader under CPLR 1006 is available to a stakeholder facing multiple liability.

Does this mean my vendor is going out of business?

Not necessarily. Some financing agreements permit notification without any default. Treating the notice as evidence of insolvency and terminating the relationship can create contract exposure of its own.

The notice tells you where to send money. It says nothing reliable about the vendor's condition.

My funder sent notices to my customers. Can they do that without suing me?

Yes. Under UCC 9-607 a secured party may notify account debtors and collect directly, without a lawsuit and without advance notice to you, where it has contractual authority or is acting after default.

This is the fastest way a business gets interrupted, because it stops revenue at the source rather than freezing what has already arrived. Most owners learn of it when a customer calls. What else follows a default is covered at I already stopped paying.

Can I get a notice of assignment withdrawn?

It turns on whether the notification met the statutory requirements, whether the sender can substantiate the assignment, whether the underlying agreement authorizes notification on these facts, and where that claim sits against other filings on the same collateral.

Those are document questions. How quickly they resolve depends on whether the facts are contested.

How do I remove a UCC lien filed by a funder?

Send a signed demand for a termination statement. For non-consumer collateral, UCC 9-513(c) requires the secured party, within 20 days of receiving the demand, to either send you a termination statement or file one, once the obligation is satisfied and there is no commitment to make further advances.

If it does neither, under 9-509(d)(2) you may authorize and file your own termination identifying it as debtor-authorized. Failure to comply can support actual damages plus $500 statutory damages under 9-625. If you are resolving the position by agreement, put the termination obligation and a deadline into the settlement itself, before you pay.

Can I get a partial release or a subordination instead?

Sometimes, and it is worth asking. Where a position is not fully satisfied but you need specific collateral freed, or need a new lender to sit ahead, funders will sometimes agree to a partial release or a subordination agreement as part of a broader resolution.

Neither is automatic and both have to be negotiated and documented.

Will a UCC lien block me from getting other financing?

It can. A blanket filing on receivables sits in the public record and any lender running a search will see it. Some decline, some reprice.

Effect depends on the collateral, priority, and the lender's underwriting. Note that an ordinary financing statement lapses five years after filing unless continued, so it does not sit there forever, though five years is long enough to cost you a financing.

How do I find out what liens are filed against my business?

Search the filing office in each debtor's relevant jurisdiction. For a registered organization that is generally the state under whose law it is organized.

Search every name variant, and search related entities where they are debtors, guarantors, or owners of the collateral. Filing order matters for priority, so the sequence of results is part of the analysis.

Attorney Advertising. General information about legal process, not legal advice. Reading this page does not create an attorney-client relationship. Every matter depends on its own documents and facts. Settlement figures referenced are publicly published third-party claims, not results obtained by this firm. Prior results do not guarantee a similar outcome.

Last reviewed: August 19, 2026