§ 10:9-408 — Restrictions on assignment of promissory notes, health-care-insurance receivables,

§9-408. Restrictions on assignment of promissory notes, health-care-insurance receivables,
and certain general intangibles ineffective
(a) Term restricting assignment generally ineffective. Except as otherwise provided
in Subsections (b) and (f) and R.S. 10:9-410, a term in a promissory note or in an agreement
between an account debtor and a debtor which relates to a health-care-insurance receivable
or a general intangible, including a contract, permit, license, or franchise, and which term
prohibits, restricts, or requires the consent of the person obligated on the promissory note or
the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of
a security interest in, the promissory note, health-care-insurance receivable, or general
intangible, is ineffective to the extent that the term:
(1) would impair the creation, attachment, or perfection of a security interest; or
(2) provides that the assignment or transfer or the creation, attachment, or perfection
of the security interest may give rise to a default, breach, right of recoupment, claim, defense,
termination, right of termination, or remedy under the promissory note, health-care-insurance
receivable, or general intangible.
(b) Applicability of Subsection (a) of this Section to sales of certain rights to
payment. Subject to Subsection (f) of this Section, Subsection (a) of this Section applies to
a security interest in a payment intangible or promissory note only if the security interest
arises out of a sale of the payment intangible or promissory note, other than a sale pursuant
to a disposition under R.S. 10:9-610 or an acceptance of collateral under R.S. 10:9-620.
(c) Legal restrictions on assignment generally ineffective. Subject to Subsection (f),
a statute, governmental rule or regulation that prohibits, restricts, or requires the consent of
a government, governmental body or official, person obligated on a promissory note, or
account debtor to the assignment or transfer of, or creation of a security interest in, a
promissory note, health-care-insurance receivable, or general intangible, including a contract,
permit, license, or franchise between an account debtor and a debtor, is ineffective to the
extent that the statute or regulation:
(1) would impair the creation, attachment, or perfection of a security interest; or
(2) provides that the assignment or transfer or the creation, attachment, or perfection
of the security interest may give rise to a default, breach, right of recoupment, claim, defense,
termination, right of termination, or remedy under the promissory note, health-care-insurance
receivable, or general intangible.
(d) Limitation on ineffectiveness under Subsections (a) and (c). To the extent that
a term in a promissory note or in an agreement between an account debtor and a debtor which
relates to a health-care-insurance receivable or general intangible or statute or regulation
described in Subsection (c) would be effective under law other than this Chapter but is
ineffective under Subsection (a) or (c), the creation, attachment, or perfection of a security
interest in the promissory note, health-care-insurance receivable, or general intangible:
(1) is not enforceable against the person obligated on the promissory note or the
account debtor;
(2) does not impose a duty or obligation on the person obligated on the promissory
note or the account debtor;
(3) does not require the person obligated on the promissory note or the account
debtor to recognize the security interest, pay or render performance to the secured party, or
accept payment or performance from the secured party;
(4) does not entitle the secured party to use or assign the debtor's rights under the
promissory note, health-care-insurance receivable, or general intangible, including any
related information or materials furnished to the debtor in the transaction giving rise to the
promissory note, health-care-insurance receivable, or general intangible;
(5) does not entitle the secured party to use, assign, possess, or have access to any
trade secrets or confidential information of the person obligated on the promissory note or
the account debtor; and
(6) does not entitle the secured party to enforce the security interest in the promissory
note, health-care-insurance receivable, or general intangible.
(e) Section prevails over specified inconsistent law. This Section prevails over any
inconsistent provisions of Civil Code Article 2653.
(f) Inapplicability. This Section does not apply to an assignment of any pension,
disability, annuity, retirement or other benefit, distribution or allowance right or payment
from any governmental retirement system or pension fund or any other governmental unit,
workers' compensation claims or payments, unemployment compensation benefits, public
assistance payments, crime victim reparations, or lottery payments.
(g) "Promissory note." In this Section, "promissory note" includes a negotiable
instrument that evidences chattel paper.
(h) Subsections (a) and (c) of this Section do not apply to the assignment or transfer
or creation of a security interest in:
(1) a claim or right to receive compensation for injuries or sickness as described in
26 U.S.C. 104(a)(1) or (2), as amended; or
(2) a claim or right to receive benefits under a special needs trust as described in 42
U.S.C. 1396p(d)(4), as amended.

Legislative History

Acts 1988, No. 528, §1, eff. Jan. 1, 1990; Acts 1989, No. 135, §7, eff. Jan. 1, 1990; Acts 2001, No. 128, §1, eff. July 1, 2001; Acts 2004, No. 303, §2; Acts 2012, No. 450, §1, eff. July 1, 2013; Acts 2024, No. 773, §1.