Confession of Judgment (COJ)
A Confession of Judgment (COJ) is a contractual provision where the merchant pre-authorizes the funder to obtain immediate court judgment upon default without traditional litigation — historically a major MCA collection tool, now banned or restricted in many states (most notably New York) due to abuse concerns.
Why This Matters
COJ provisions allowed funders to convert default into enforceable court judgment within days rather than the months required for traditional litigation. The merchant signs an acknowledgment of debt at funding; upon default, the funder files the COJ with court for immediate judgment entry. New York's 2019 reforms effectively eliminated COJ use against out-of-state debtors (the previous primary use case), and many other states have restricted COJ enforceability. Modern MCA contracts increasingly omit COJ provisions or include them only for in-state merchants in jurisdictions still permitting use. The compliance landscape continues evolving.
Frequently Asked Questions
Frequently Asked Questions
Why did New York restrict Confession of Judgment use in MCA?
Investigative reporting documented widespread COJ abuse — funders obtaining judgments against merchants who had legitimate disputes about default declarations, with merchants discovering judgments only after bank account levies. The 2019 New York reforms eliminated COJ enforcement against non-New York merchants, ending the primary collection use case.
Are Confession of Judgment provisions still used in MCA today?
Limited use compared to historical practice. Some funders include COJ provisions for in-state merchants in jurisdictions still permitting use. Many funders have eliminated COJ provisions entirely from contracts. Collection enforcement increasingly relies on traditional litigation, demand letters, and workout negotiations rather than COJ acceleration.