Assignment of account refers to the legal process by which an individual or entity transfers the rights and ownership of a particular account receivable to another party, often for the purpose of collecting payment. In this type of agreement, the assignor (the original owner of the account) assigns or sells their rights to receive payment from the debtor to the assignee (the new owner of the account).
The assignment of account typically involves three parties: the assignor, the assignee, and the debtor. The assignor may be a business, a financial institution, or an individual who is owed a debt from the debtor. The assignee, on the other hand, is usually a financial institution or a debt collection agency that specializes in collecting outstanding debts. The debtor is the party who owes the debt to the assignor and will now have to make payments to the assignee.
To effectuate an assignment of account, a legal agreement is usually drafted, which spells out the terms and conditions of the assignment. This agreement includes details such as the amount owed, the identity of the debtor, the effective date of the assignment, and any applicable fees or commissions. Once the assignment is complete, the assignor no longer has the right to collect payment from the debtor, and the assignee assumes full responsibility for the collection process.
The assignment of account is a common practice in business and financial transactions, particularly in cases where the original creditor lacks the resources or expertise to pursue debt collection. This arrangement enables the assignor to monetize their outstanding accounts, while the assignee takes on the task of collecting payment from the debtor.
