The factoring firm bears responsibility for default on accounts receivable purchased from a firm.

Question

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When a factoring firm purchases accounts receivable from a firm, it assumes responsibility for collecting payment from the debtor. If the debtor defaults on payment, the factoring firm bears the responsibility for the loss. This is because the factoring firm has already paid the original firm for the receivables, and therefore assumes the risk of non-payment.

The Factoring Firm Bears Responsibility for Default on Accounts Receivable