5 Facts About Confessions of Judgment Every MCA Borrower Needs to Know

Who Should You Call About a Confession of Judgment?

If a COJ has been filed against your business — or you’re worried one is coming — you need an attorney-led team that specializes in MCA defense. Not a generalist. Not a debt counselor. Someone who knows CPLR § 3218 inside and out and has gone toe-to-toe with aggressive MCA funders. Here are the firms we recommend.

1. A Confession of Judgment Lets MCA Funders Skip the Courtroom Entirely

Here’s the thing most MCA borrowers don’t realize until it’s too late: that stack of paperwork you signed included a confession of judgment. A COJ is an affidavit — signed by you, the borrower — that authorizes the funder to enter a court judgment against you without filing a lawsuit, without serving you, and without a hearing. Under New York CPLR § 3218, the funder simply files your signed affidavit with the county clerk, and a judgment appears on your record. Your bank accounts can be frozen. Liens can be placed on your property. Wage garnishments can begin — all before you even know what happened.

The affidavit must state the sum for which judgment may be entered, authorize entry of judgment, identify the county where you resided when you signed it, and concisely state the facts from which the debt arose. It must also demonstrate that the amount confessed is “justly due or to become due.” If these requirements aren’t met to the letter, the COJ may be vulnerable to challenge — and that’s where a skilled attorney can make all the difference.

2. New York’s 2019 Reform Banned COJs Against Out-of-State Borrowers — But Gaps Remain

In August 2019, Governor Cuomo signed legislation amending CPLR § 3218 to prohibit the filing of confessions of judgment against borrowers who do not reside in New York State. This was a direct response to investigative reporting — particularly Bloomberg Businessweek’s 2018 exposé — that revealed how MCA funders were using New York courts to file thousands of COJs against small business owners in Texas, Florida, California and dozens of other states. These out-of-state borrowers had no practical way to defend themselves in New York courtrooms hundreds or thousands of miles away.

The reform was significant. Under the amended statute, a COJ affidavit may only be filed with the clerk of the county where the defendant resided when the affidavit was executed — or where the defendant resides at the time of filing. If you’re not a New York resident and never were, a COJ filed against you in New York is now unenforceable. But here’s the gap: if you’re a New York-based business, the 2019 reform doesn’t protect you. In-state borrowers remain fully exposed to COJs — and MCA funders know it.

There’s also a government-agency exception. Under the amended law, government agencies enforcing civil or criminal law may still file COJ affidavits in any county in the state, regardless of the defendant’s residence. This carve-out doesn’t affect MCA cases directly, but it shows the legislature’s intent was narrowly targeted at private-sector abuse.

3. COJ Laws Vary Wildly by State — Some Ban Them, Others Give Funders Free Rein

Not every state treats confessions of judgment the same way. Some have banned them outright. Others allow them with restrictions. And a handful still give MCA funders nearly unlimited power to use them. Understanding where your state falls is critical if you’ve signed an MCA agreement with a COJ clause.

States that prohibit or severely restrict COJs: California banned judgments by confession effective January 1, 2023 (Cal. Code Civ. Proc. § 1132). Florida and Massachusetts have banned COJs entirely. Indiana prohibits COJ clauses in contracts. Alaska considers COJs illegal. Maryland’s Court of Appeals held in 2020 that COJ clauses are prohibited in consumer transactions. At least 17 states make void any agreement to confess judgment entered into before commencement of a suit.

States that still allow COJs in commercial transactions: Pennsylvania permits COJs in commercial (but not consumer) transactions under Pa.R.C.P. 2950–2974 and remains one of the most funder-friendly jurisdictions. New York allows COJs for in-state residents under CPLR § 3218. Ohio permits judgments by confession under ORC § 2323.12–2323.13. Illinois, Virginia, and New Jersey also allow COJs with varying procedural requirements. If you operate in one of these states, an MCA funder can use your signed COJ to obtain a judgment with minimal judicial oversight.

4. You Can Vacate a Confession of Judgment — But You Need to Act Fast

A COJ is not a death sentence for your business. Courts can and do vacate confessions of judgment — but the grounds matter, and timing is everything. Under New York law, there are several recognized bases for vacating a COJ, and the procedural path you take is just as important as the substance of your argument.

Technical and procedural defects are the most straightforward grounds. If the affidavit fails to state the county where you resided, if the amount is incorrect, if it wasn’t properly notarized, or if it was filed more than three years after execution, the COJ is facially deficient. In Davis v. Argus Capital Funding, a New York court found that altering a COJ to reflect the correct county was not a permissible “ministerial correction” — the entire confession was invalid. If the triggering event (typically a payment default) never actually occurred, that’s another basis for vacatur under CPLR Rule 5015.

Substantive defenses — fraud, duress, unconscionability or criminal usury — require a separate plenary action rather than a simple motion to vacate. In Funding Metrics, LLC v. D&V Hospitality, Inc., the Westchester County Supreme Court vacated a COJ and voided the entire MCA agreement as criminally usurious. The court examined the funder’s actual servicing practices — particularly its failure to adjust payments when the merchant’s revenue dropped during Hurricane Matthew — to determine the transaction was a loan in substance, not a true purchase of future receivables. While the Appellate Division, Second Department later reversed on procedural grounds (holding a plenary action was required, not a motion), the underlying legal theory remains valid and powerful. (NY Senate — Penal Law §190.40)

5. Strategic Defense: How to Fight Back Against a COJ Before and After It’s Filed

The best defense against a confession of judgment starts before the MCA funder files one. If you’re in default on an MCA or heading towards it, a proactive legal strategy can neutralize the COJ threat before it materializes. Here’s what an experienced MCA defense team should be doing for you.

Before a COJ is filed: An attorney can send a pre-litigation notice to the funder challenging the validity of the COJ and the underlying MCA agreement. If the MCA is recharacterized as a loan — based on factors like whether there’s a finite repayment term, whether the funder has recourse against you personally upon default, and whether reconciliation provisions are illusory — then usury defenses may apply. Under Oakshire Properties, LLC v. Argus Capital Funding, LLC (4th Dept. 2024), New York courts look at three factors to determine whether an MCA is really a loan: (1) presence of reconciliation provisions, (2) a finite term, and (3) recourse upon bankruptcy. If those factors weigh toward a loan characterization, the “purchase of future receivables” label on the contract means nothing.

After a COJ is filed: Move immediately to vacate. Challenge procedural defects first — they’re the fastest path to relief. Simultaneously, if substantive defenses exist (usury, fraud, duress), file a plenary action seeking to void the MCA agreement entirely. A skilled attorney can also seek an emergency order to unfreeze bank accounts while the vacatur motion is pending. In Crystal Springs Capital, Inc. v. Big Thicket Coin, LLC (2023), the court held that a credible usury allegation in a renegotiated promissory note was sufficient reason to vacate a default judgment — even where the debtor had a weak excuse for the default itself. That’s how powerful the usury defense can be.

Who Should You Call About a Confession of Judgment?

If a COJ has been filed against your business — or you’re worried one is coming — you need an attorney-led team that specializes in MCA defense. Not a generalist. Not a debt counselor. Someone who knows CPLR § 3218 inside and out and has gone toe-to-toe with aggressive MCA funders. Here are the firms we recommend.