The phone call from your biggest customer is the worst part. “We got a letter from a company saying we need to pay them directly instead of you. What’s going on?” That letter is a UCC § 9-406 notification, and it is the most aggressive collection tool an MCA funder has short of filing suit.
How you respond in the first 72 hours often determines whether you keep the customer relationship or lose it permanently. Here is the action sequence.
Ask the customer to forward the notice verbatim. Read it word-for-word before responding.
Locate the original MCA contract and confirm whether the funder has UCC-9 notification rights.
Call the customer directly. Acknowledge the notice, reassure on contract performance, do not dispute it in writing yet.
Confirm there is a current default, an actual UCC-1 on file, and that the notice complies with § 9-406.
Open a negotiated payoff or settlement track quickly. Every day with active notices erodes vendor trust.
Save copies of the notice, customer communications, and all funder demands. This is your tortious-interference record.
Improper or premature notices can support tortious interference, defamation, or unfair-practice claims back at the funder.
1. Get the Notice in Hand
Ask the customer for a copy of what they received. You need to see the exact letter: the sender, the date, the language used, whether it identifies a specific account or sweeps all receivables, and whether it includes proof of authority.
Many notices are technically defective. They lack required identification of the underlying obligation, fail to provide adequate proof of authority under UCC § 9-406(c), or were sent by a party without standing. A defective notice is not legally binding on the customer.
2. Pull Your Security Agreement
The MCA contract controls what the funder is allowed to do. Did you grant a security interest in this specific account, or in receivables generally? Did the contract require notice to you before the funder could redirect payments? Did the funder satisfy contractual conditions precedent before sending the § 9-406?
Funders frequently send notices before they have actually triggered any contractual default. If you can show the notice was premature or unauthorized, you have grounds to challenge it.
Once a UCC-9 notice is sent to a customer, the receivable account is legally diverted to the funder under UCC § 9-406. You have a narrow window, usually 24 to 72 hours, before the customer remits to the funder and the relationship is materially damaged.
3. Stabilize the Customer Relationship
Before you talk to the funder, talk to the customer. Be honest, brief, and calm. The customer’s concern is operational: will my supply or service continue, and who do I pay? Reassure them on operations, acknowledge the dispute, and tell them you are working with senior advisors to resolve it.
Do not ask the customer to ignore the notice. Under UCC § 9-406(a), a customer who receives a valid notice and pays the original creditor anyway can be required to pay twice. The customer has real legal exposure and you should not push them into it.
Customer trust is the asset you must protect first. A funder can be settled with for 30 to 60 cents on the dollar in most cases. A customer relationship destroyed by a botched response cannot be bought back at any price.
4. Identify Whether the Notice Is Valid
An independent attorney from our network can evaluate the notice for compliance with UCC § 9-406:
- Does it reasonably identify the rights assigned?
- Does it instruct the customer to make payment to the secured party?
- Was it sent by an authenticated record?
- Did the secured party provide proof of assignment when requested?
A non-compliant notice does not create a duty for the customer to redirect payments. If the notice is invalid, the customer can be told (by counsel) that they may continue paying you without liability.
5. Move Quickly Toward Negotiated Resolution
The longer the notices stay in place, the more damage compounds. Customers tell other customers. Your sales team loses deals because prospects hear the rumor. Vendors hear about it and tighten terms.
Our senior advisors typically open a parallel settlement track within the first 24 to 48 hours. The funder’s goal in sending § 9-406 notices is leverage; once that leverage has produced a settlement conversation, most funders will pull the notices as part of a resolution package.
6. Document Everything
Save every notice, every email from a customer about a notice, every internal communication about lost business, and every settlement communication from the funder. If the matter escalates to litigation, this contemporaneous record supports both your defense and any affirmative claims for tortious interference or violation of UCC § 9-625.
7. Consider the Affirmative Claim
If the funder sent notices it had no right to send, and you can document concrete damages, lost contracts, terminated relationships, drops in receivables, you may have an affirmative claim against the funder for tortious interference and damages under UCC § 9-625. An independent attorney from our referral network can evaluate whether the facts support such a claim and whether filing it adds leverage to settlement.
Done well, the response combines fast customer-relationship management, immediate legal analysis of notice validity, and parallel settlement negotiation. Our senior advisors run the customer and negotiation tracks. Independent counsel handles the validity analysis and any court filings.
Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.
Get a free 30-minute call with a senior advisor →
Tell us about your situation. A senior advisor, not a sales rep, will review your engagement and respond within 30 minutes with a clear action plan. Free consultation, no obligation.
- Move quickly to stop daily ACH debits where reconciliation rights apply
- Vacate Confessions of Judgment in 72 hours
- Senior advisor, not a salesperson