Restraint Letters to Customers
Top Companies to Stop Restraint Letters to Your Customers - 2026
Because these letters go to your customers, not to a court or to you, the information hit on your reputation is instant. A financial crisis where your customers are actually redirecting payment can be a lightning bolt: if you lose a couple of big customers you can starve for cash in one billing cycle. And a customer who has the request redirected now knows you are in trouble, and may rethink your relationship.
Figure Out Which Kind of Letter You Have
First figure out which kind of letter you have. In New York, a court restraining notice requires a judgment for it to go out. UCC 9-406 letters don’t require a judge at all.
A restraining notice needs to list the parties and the court; to have the judgment date; to give the amount and balance; and to mention contempt. Check these boxes when it shows up.
Your customer may not even be legally bound by the notice. It can only bind the recipient for up to a year after the funder serves it, and only if the customer owes you money when the notice is served. A second restraint on the same customer requires court permission, so look at it with your lawyer.
A lawyer who’s actually licensed in your state can go to court and ask for enforcement to stop, to be limited, or to be modified. A court can vacate a notice that doesn’t list the names of the parties, the judgment date or amount, but it takes a motion and it can leave the judgment in place, so you need to move quickly. You have a year after notice of entry to move to vacate a default judgment. And since 2019 New York State no longer allows confessions of judgment against out-of-state businesses.
A UCC 9-406 notice is different: it doesn’t have to go through a court, and once your customer gets it it can only clear its debt by paying the funder, not you. If it keeps paying you, your customer may be making payments twice: once to you, and once to the funder. Your customer may insist that the funder show it proof of the assignment. Either way, don’t tell your customer to ignore a notice.
Your funder may also send the notice to your card processor, or to a platform. Once they do, these companies may freeze settlement. So one notice can choke off most of your daily revenue, leaving you with thin means to fight back.
Beat Your Funder to Your Customers
You want to beat your funder to your customers. After you hear about the notices, you should call them yourself, calmly, and say there’s a dispute that you’re resolving. Let your customer ask their own expert. Tell them you’ll get back to them by a specific date. Even as you find an expert to go over the letter with you, you need to keep performing flawlessly. The notice was sent because of your finances: all eyes are on your performance now.
When you bring in that expert, it doesn’t work to ask your lawyer to negotiate and expect your negotiator to sue. Your law firm should sort out whether the notice is valid, whether your advance is really a sale of receivables, and how to stop it in court. A negotiator manages payment.
Make a Deal with the Funder
9-406 notices can’t be ignored or withdrawn by a lawyer: only the funder can do it. The least difficult way to get it off your back may be to make a deal with the funder so they can withdraw it, and that’s where an expert negotiator can come in. Make sure the deal spells out the remaining balance and terms. Releases should cover you and any personal guarantor; UCC-3s should be filed to end the lien, and letters of withdrawal should go to every recipient of the notice. Make a list of every single person the funder told to pay them instead of you. Know who sends each withdrawal letter, how it’s sent, who gets it, and by when. An agreement that doesn’t spell this out can leave you wondering why the notices don’t go away.
Every funder decides for itself, and while plenty of them are open to talking none is obligated to. Settlement companies can’t guarantee results, either: each case is different.
If you can’t settle with the funder, a bankruptcy filing automatically stays judgment enforcement and collection, while you figure out your plan. Current rules allow a Subchapter V filing by a small business whose debt is $3,424,000 or less, as of this writing. Consult your own lawyer.
Choosing who to hire: The FTC has a rule that says you can’t pay fees to a company until you get a debt settled and paid on, although the rule is written for personal unsecured debt. So when looking for help ask whether you’re paying up front or after a debt has settled. You have the right to ask and the right to say no. Get legal advice before making any deals, and make sure you understand what you’re signing.