What You Can Still Do After an MCA Confession of Judgment

The clerk entered judgment against you before anyone mentioned a dispute. No summons arrived. No hearing was scheduled. The instrument performed as drafted.

You authorized the judgment years before the funder sought it. A confession of judgment, the device the older statutes call a cognovit, is the clause in your merchant cash advance agreement that permits the funder to take judgment against you with no lawsuit filed, no process served, and no defense heard anywhere along the way. The clause sat among dozens of provisions in the agreement you signed the day the money arrived; it was, if we are being precise, never negotiated, only included. Few owners remember it. Fewer understood it. Almost no one had a lawyer read the agreement before signing, at least in the files that reach us, and a practice is not a survey.

The confession is the sharpest instrument the funder owns. It converts a payment disagreement into an enforceable judgment in the time a clerk needs to stamp a filing, and the judgment then does what judgments do: it attaches to your property as a lien, it authorizes restraints on your bank accounts, it surfaces in every credit search that follows. All of this happens while you are still making payroll. You sign the agreement and then you learn what the agreement means.

How the Judgment Is Entered

Default is whatever the funder declares it to be, within the wide discretion the agreement reserves, and a single returned ACH debit or a dip in processing volume has been enough under agreements of this kind. Once default is declared, the funder’s attorney delivers an affidavit of confession to the court clerk. The affidavit attaches the confession you signed, recites the amount claimed, and describes the default. The clerk enters judgment. No judge weighs the merits, no hearing appears on any calendar, and notice is not part of the procedure.

The freeze on your operating account is, for most owners, the announcement. Sometimes the news arrives as a letter from a sheriff, sometimes as a lien search that returns a judgment no one in your office had ever seen. The amount entered is not the amount you would compute at your own desk. It carries the full remaining balance as the funder calculates it, plus legal fees, collection costs, default penalties, and whatever further charges the agreement managed to authorize, arithmetic that arrives at the courthouse pre-approved.

The 2019 New York Amendment

New York carried this trade for years. Funders across the country wrote New York venue into their agreements because the clerks of that state accepted confessions and entered them as a matter of routine, whatever the borrower’s address. In 2019 the legislature amended the Civil Practice Law and Rules to narrow the practice. The practice survived.

But it survived in a narrower form. The amendment removed out-of-state defendants from reach in consumer transactions, and on the commercial side it raised the cost of carelessness: the affidavit must plead specific facts about the default, show the arithmetic behind the amount claimed, and state the basis of the funder’s claim, with the purchase agreement and proof of default attached to the filing. Conclusory recitals fail under the amended statute. Whether the legislature meant to end the practice or to make it tidier is a question worth considering. There are exceptions and carve-outs, though in practice they tend to be narrower than funders hope.