MCA Confession of Judgment Defense: 5 Documents and Rules to Review

A confession of judgment shows up from nowhere and nearly always seems to have cut you off at the pass. However, there are five things worth looking at before you do anything else, since they can make it possible to keep going. Look at: the signed affidavit, when and where it was filed, the MCA contract itself, your own state’s rules, and the court file and bank levy papers. That combination decides a lot about what happens next.

There is a whole procedural trail leading to a levy at the bank. There were probably regular bank withdrawals, a default was declared when they stopped, judgment entered, and only after a period of time did the bank levy happen. Each step probably had its own deadline.

CPLR 3218

Start with the signed affidavit. New York CPLR 3218(a) says an affidavit has to state the amount of judgment, say that the creditor can enter judgment, and state where the signer lives. Courts interpret this strictly, for instance in January 2024 the Kings County Commercial Division vacated one that did not properly state the signer’s county of residence. Compare the affidavit to the county where you were actually living when you signed. The importance of this being right matters because for years New York was the favorite location for MCA funders to file their confession judgments, even though defendants lived in other states. If the affidavit is wrong, there is a chance it cannot support a bank levy.

That done, when and where were the confession and affidavit filed? CPLR 3218(b) says it has to be done within three years of the date of signing, in the county where the signer was living at signing or filing. And since August 30, 2019, any confession affidavit to be filed in New York must be from someone living in the state. For a company outside New York, any judgment filed since 2019 may not stick.

Next comes the MCA contract. Companies sell MCAs as sales of future receivables. But some contracts have fixed daily withdrawals, get repaid regardless of income, and let funders come back for personal recourse if necessary. This does look like a loan, even if in another form. The contract decides if there is a loan or not. It becomes a loan when the funder is absolutely entitled to repayment, which comes down to these three factors: if there is any reconciliation provision, if it is for a finite term, and whether the funder has recourse if the merchant goes bankrupt. Courts examine it closely for aggressive confession clauses, unlimited personal guarantees, and fees that do not line up with the product offered. There is no generic MCA. Many contracts require the funder to balance out merchant receipts with withdrawals, if the merchant asks for a tally. The funder’s refusal to make it may point to a wrongful default.

New York corporate borrowers often can’t claim usury, but even corporations can sometimes raise criminal usury, at rates over 25% a year. It voids the debt from the start, and can undercut an attempt to levy on your bank account.

You want to also check your own state rules. The FTC’s blanket ban on confessions for consumer loans doesn’t apply to merchant cash advances. Texas has voided confessions in commercial sales-based financing, and from September 1, 2025 funders will have to make disclosures. California’s SB 1235 commercial financing disclosure law may turn out to make a difference. Other states may have different rules, with different deadlines and exemptions. Check with an attorney licensed in that state.

Challenging the confessed judgment in most cases calls for a separate lawsuit. But lack of jurisdiction can be raised by a motion to vacate the judgment itself. You still need the court file. You want the court file because it will tell you who’s involved, what court and what index number. You also want the bank to give you copies of the served papers, the writ, restraining notice, and information subpoena. Pull the case docket online for all activity. And for an example of what a good result can look like, the New York Attorney General settled a case with Yellowstone Capital, canceling $534 million in debts owed by merchants.

As soon as possible, look for bank levy papers. A levy can freeze your accounts within hours and without warning. New York uses a restraining notice served on the bank, freezing up to twice the amount of the judgment. Before the bank turns the money over, you must get notices of exemption and claim forms, both of which come with a window of weeks to claim exemptions or make a motion to vacate the judgment. California law says the bank has to send the funds to the sheriff in ten days, and you have fifteen (or twenty by mail) to claim exemption. Be aware that a restraining notice typically covers all the accounts at a bank. Later deposits may still be snared. Remember also that a UCC lien continues to be an available remedy to enforce a judgment. Once the money is turned over to the creditor, it’s hard to recover.

What happens at the bank in the first 24 to 72 hours matters. Call the bank’s legal department and confirm what was served, the court, the amount. Then gather all the payment history, MCA contracts and papers served on you, and see a lawyer as soon as possible. Do not move funds or close any accounts until that is done. These arguments won’t guarantee any result, and moving money can raise issues about fraudulent transfer that can make things worse.