What Is a Confession of Judgment?
A confession of judgment is a legal instrument in many MCA contracts allowing the funder to obtain a court judgment against you without a trial, without notice, and without giving you an opportunity to be heard. When you signed the MCA with a COJ clause, you pre-authorized the funder to get a judgment if you default, waiving your right to defend yourself.
How COJs Are Used in MCA Enforcement
The process is fast and one-sided. The funder’s attorney prepares an affidavit of default, attaches the signed confession from your contract, and files with the court, typically in New York. The court enters a judgment, often the same day. Within days, the funder uses the judgment to freeze bank accounts, levy assets, and garnish receivables. By the time you learn about it, your accounts may already be frozen.
The 2019 New York Reform
In August 2019, New York amended CPLR Section 3218 to prohibit confessions of judgment against out-of-state defendants. This was a direct response to the MCA industry’s practice of using New York COJs nationwide. If you are located outside New York and a funder filed a COJ after August 2019, that judgment is improper and can be vacated.
How to Fight a COJ
If a confession of judgment has been filed against you, act immediately. File a motion to vacate. Grounds include out-of-state borrower status after the 2019 amendment, fraud or misrepresentation in obtaining the COJ, no actual default at the time of filing, the underlying MCA is void due to usury or unconscionability, or improper execution of the COJ clause. Time is critical because once enforcement begins, each day allows the funder to drain your accounts.
Prevention
Before signing any MCA, have an attorney review for COJ clauses. If possible, negotiate removal. If the funder insists, understand the implications and ensure your attorney has a plan to challenge it if needed.