Marketing Agencies and Consultancies: 6 Reviews of Retainer Revenue and MCA Claims

After declaring a default, many MCA funders send UCC 9-406 notices to your retainer clients directing them to remit payments directly to the funder. Your clients are far more likely to blindly cooperate with the funder than fight on your behalf. This letter hits your reputation with clients who pay you. Please review the following six points carefully. This is meant to be educational, not legal advice. For legal advice, please speak with a licensed attorney in your state.

Section 9-406 is the UCC statute that provides the guidelines for notifying a third-party payor (in your case, a retainer client) about the assignment. The letter is a notice a funder sends to your clients to cite the assignment and direct all money to funder. The letter itself is not signed by a judge and is not an official court document. Its power comes from the statute paired with your signed contract. As such, it doesn’t need a lawsuit.

Although a 9-406 notice isn’t a court order, there are consequences for ignoring them. Section 9-406 mentions a word “account debtor” many times. That term means the client who owes you money from retainers. An account debtor with effective notice can only discharge the debt by paying the funder. If your clients pay you instead, they may need to pay the invoice twice. It’s not a bluff, though, and some retainer clients may ask to see proof the funder has a right to collect money. When clients challenge a 9-406, they’re likely to do so with their own advisers. Urging clients to ignore the 9-406 can risk your own relationship with them.

If you’re paid by card, the funder may send its notice to the payment processor or platform. That one letter could intercept most of your revenue. Many payment processors err on the side of caution and freeze or redirect payments until the dispute is sorted. Sending a notice to a processor differs practically and legally from sending a 9-406 notice to a client. It also differs from a court judgment freezing your account.

Money could be redirected in days, and that could starve your payroll and vendors in a single cycle. Not all funders exercise the “direct all payments” provision, but many do. For them, the intention is to get your attention and reach a fast resolution. There are other, quieter costs, too. A client who gets a 9-406 notice now knows you’re in trouble, and corporate clients often reassess relationships after events like these. A private dispute that is between you and your funder now becomes public, or at least shared with a third-party. Something a funder made public has forced your hand, and you now need to figure out a resolution that can move quickly.

A Polite, Proactive Call

Call your clients before they call you. Acknowledge the dispute, but don’t overshare or overexplain. A polite, proactive call with “this is what’s happened, here’s what I’m doing,” lets a client know that you take the relationship seriously and are being mindful of their interests. Something like: “You may have gotten a letter from a finance company about paying them or us, and I wanted you to hear it from me. Yes, we have a dispute that we’re resolving, but we’d still like to continue working with you.” Don’t tell your client what to do with the letter. It’s not your client’s place to fight it on your behalf, and you shouldn’t ask them to. Point out that this is an issue with your funder, and they should speak to their own advisors. Provide a date for an update and keep it. Keep doing the best work you can, for as long as you can.

Distinguish Between a MCA and a Loan

A question you might ask about an MCA is whether it’s a loan, and that’s a relevant question to understand your own rights. Courts have considered this question, and New York’s Appellate Division outlined three main factors to distinguish between a MCA and a loan:

• First, a reconciliation clause.
• Second, a finite term of how long the money will be repaid.
• Third, recourse if the borrower goes bankrupt.

Whether yours is a loan is a question for a licensed attorney, but in New York, interest over 25 percent per year is considered criminal usury and a class E felony. Why does this matter to you? Even if a funder sends a 9-406 notice, if the advance isn’t a valid receivables purchase, then the funder’s whole position - including its letters - may be weaker.

State law also limits what funders can do. Since August 30, 2019, New York confession-of-judgment filings are only allowed against debtors residing in New York or with a place of business there. Texas House Bill 700, effective as of September 1, 2025, requires a MCA lender to have a perfected first-priority security interest before it can process automatic debits from your deposit account. The same Texas law also states that any contract containing a confession-of-judgment clause is void. The regulatory landscape for MCAs has also started shifting. In January 2025, the New York Attorney General won a $1.065 billion judgment against Yellowstone Capital, which canceled over $534 million of small-business debt. An order from the Federal Trade Commission, issued in June 2022, bans RCG Advances and its owner from doing business financing. The order also forced RCG to vacate judgments and release liens.

Get a Retraction

Ultimately, only the funder who sent the 9-406 letter can withdraw it. To turn the letters off, resolve the default and the claim and get a retraction. Usually, this happens after you’ve negotiated a new payment arrangement with your funder. It’s important to get the retraction in writing, specifically naming which clients, processors and platforms got the notice, and to specify a timeline for when it will be withdrawn. It’s a negotiation point, and nothing forces the funder to agree to this. Results vary.

The best offers typically have full settlements for the unpaid balance of the debt and repayment terms. A strong offer resolves the terms of the contract, releases any business or personal guarantees, ends the UCC-1 lien, and requires the funder to withdraw all notices in writing. You’ll want to make sure your funder submits a UCC-3 filing to remove the lien from your business.