When your funding is sold to someone else

What the assignment clause says

Two sentences, usually near the back. The funder may sell, assign, transfer or participate its rights without your consent and without notice. You may not assign anything without written consent. That asymmetry is standard, and it means a sale can happen without anyone asking you.

An assignee generally takes the contract as it is — same rate, same balance, same term, same security interest, same guarantee. A UCC-3 assignment may be filed against your business showing the change of secured party.

The first thing to do: verify

Notices claiming a debt has been transferred, with new payment instructions, are a known route for fraud. Before changing where money goes:

• Get written confirmation from the original funder that it sold or assigned the account, and to whom, including the buyer's full legal name.
• Call the original funder on a number you already had, not one from the new letter.
• Ask the new holder for the assignment documentation, the account number, the current balance and a payoff figure in writing.
• Keep proof of every payment made to the previous holder, including the last one.

If you cannot verify, keep paying the original party and say so in writing while you sort it out.

What to nail down with the new holder

Does anything change for you legally

Generally an assignee takes subject to the terms of the contract, including any reconciliation clause and any obligations the original funder had. Some agreements contain waiver-of-defenses provisions aimed at claims against an assignee. Whether such a clause is effective, and what defences survive a transfer, are legal questions that vary by state and by wording.

When it is sold after a default

An account sold or placed after default usually lands with a collection firm or law firm rather than a servicer. The economics are different — the buyer may have paid a discount — and so is the tone. Ask which one you are speaking to, ask for validation of the amount claimed, and put everything in writing. The rights being asserted still come from your original agreement, so read it alongside anything they send.

The three ways an account moves

They look alike in a letter and behave very differently.

Ask which of the three happened, in writing. The answer determines who can actually agree to anything.

The double-debit week, in numbers

Illustrative only — a $415 daily debit, a transfer effective on a Tuesday, and four days before the old party's schedule is switched off. Both debit: $1,660 each, so $3,320 leaves the account in a week that should have cost $1,660.

Recovering it takes a written request, the transfer confirmation, and a decision by a company that no longer has a relationship with you. Meanwhile the money is gone and the account may be short for everything else.

Before the effective date, get written confirmation from both parties of the exact day the old debits stop and the new ones start, and set a low-balance alert for that fortnight.

The wire-instruction fraud pattern

The dangerous version is not a cold letter out of nowhere. It is an email arriving in the middle of a genuine payoff or a genuine transfer, from an address one character different from the one you have been using, correctly quoting your balance and account number, with new banking details and a plausible reason for the change.

Three rules defeat it:

1. Never accept changed payment instructions by email. Call a number you already had, from your own records, and confirm verbally.
2. Treat urgency as a warning rather than a reason. A real payoff can wait an hour for verification.
3. Where the amount is large, send a small test payment first and confirm receipt before the balance.

When the original funder disappears

An account can move because the funder failed, was acquired, or went into receivership. That is not a portfolio sale and it carries its own hazards: records are incomplete, nobody can locate your payoff figure, and the UCC-3 termination you were promised has no one left to file it.

If you are paying off in that situation, ask the party claiming the debt for the assignment chain in writing — who sold to whom, with dates — before you send anything. When the payoff is made, chase the termination yourself and verify it on the Secretary of State's index rather than accepting a confirmation email.

The file to keep, from day one

Six things, in one folder, from the moment you fund:

• The executed agreement with every exhibit.
• Every payment record, including the last payment made to any prior holder.
• Every payoff letter and balance statement, with dates.
• Every notice you have sent, with proof of delivery.
• The name and contact details of each party that has ever held or serviced the account.
• The UCC filing number, and a copy of any termination.

That folder is the difference between a transfer being an administrative change and being an argument you cannot evidence.

This is general information, not legal advice. What an assignment does to your position depends on the contract's wording and your state's law, and a lawyer licensed in your state is the person to review it.