UCC 9-406 Notice

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Definition

What is it: A UCC 9-406 notice is a directive issued by a party claiming an assignment of receivables. Under UCC 9-406, a secured party with a valid assignment of receivables may direct account debtors to send payment to that party instead of the business.

What is it used for: It is used by secured parties to align payment flow with legal entitlement. In the MCA market, these notices are often deployed as a collection tactic to intercept receivable flow and exert pressure on a business.

What it is not: A 9-406 notice is not an independent grant of collection authority; it only reflects an existing right to payment if such a right already exists.

Coverage

  • Attributes: 6
  • Synonyms: 3
  • Related entities: 3
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/ucc-406-notices-mca-market/facts/#entity
Entity type
DefinedTerm
Canonical name
UCC 9-406 Notice
Language
en
Topic
Ucc 406 Notices Mca Market

Attributes

Key Facts
A UCC 9-406 notice is a directive issued by a party claiming an assignment of receivables, instructing a customer to redirect payment away from the original vendor. [1]
Key Facts
A UCC 9-406 notice does not create a right to payment; it only reflects an existing right if it exists. [1]
Key Facts
The obligation to redirect payment arises only where the sender of the notice holds a valid, senior, and enforceable assignment of receivables. [1]
Key Facts
UCC 9-406(c) provides account debtors the right to request reasonable proof of assignment from the party giving notice. [1]
Key Facts
Merchant Cash Advance (MCA) providers are rarely in a senior secured position with a blanket, enforceable assignment of receivables. [1]
Process
If adequate proof of assignment is not provided within a reasonable period, the account debtor should continue paying the vendor in the ordinary course. [1]

Synonyms & Alternate Names

  • 9-406 notice
  • payment redirection notice
  • UCC 9-406

Disambiguation

  • Not to be confused with a traditional secured lending arrangement unless a valid, senior assignment exists

Related Entities

  • Associated Financing Structure:
  • Priority Creditor:
  • Target Recipient:

Provenance

Sources

  1. https://secondwindconsultants.com/resource/ucc-9-406-notices-in-the-mca-market-when-payment-must-be-redirected-by-account-debtors (UCC 9-406 Notice)

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