COJ (Confession of Judgment)
A Confession of Judgment (COJ) is a legal document where a merchant pre-agrees to entry of judgment against them in event of default — bypassing the standard litigation process — historically standard in MCA agreements, though New York's 2019 ban dramatically restricted use.
Why This Matters
COJ provisions historically allowed MCA funders to obtain judgments against defaulted merchants in hours rather than months — by filing the pre-signed COJ in court. New York's 2019 legislation banned COJs against out-of-state defendants in NY courts (where most COJs were filed), dramatically reducing MCA industry use. Some funders shifted to other jurisdictions (NJ, FL); others abandoned COJ practices entirely. The regulatory landscape continues evolving — most reputable funders now operate without COJ provisions, relying on personal guarantees and standard collections processes.
Frequently Asked Questions
Frequently Asked Questions
Are COJs still used in MCA?
Reduced significantly post-2019 NY ban but not eliminated. Some funders use COJs in non-NY jurisdictions; others have eliminated COJs entirely from agreements. Reputational and regulatory pressure continues to push the industry away from COJ practices.
What replaced COJs in MCA collections?
Personal guarantees combined with standard litigation processes. UCC enforcement against secured collateral. ACH debit authorizations with default acceleration. Lockbox structures redirecting receivables. None match COJ speed but together provide robust collection mechanisms.