Confession of Judgment was for years the MCA industry's most powerful enforcement tool — and ultimately its biggest reputational liability. Understanding what changed in 2019 and what's used now matters for any broker explaining contract terms to a merchant.
What a COJ is
A Confession of Judgment is a document signed by a debtor at the time of borrowing, in which the debtor consents to entry of judgment against them in the event of default — without notice, without a hearing, without an opportunity to defend.
Pre-2019, MCA contracts routinely included COJs. When a merchant defaulted, the funder filed the pre-signed COJ in a New York court, obtained a judgment within days, and could begin asset seizure across all 50 states using full faith and credit enforcement.
Why New York banned them
A series of investigative reports in 2018 documented widespread abuse — funders filing COJs against out-of-state merchants who had no connection to New York, judgments obtained in cases of disputed default, and merchants ruined before they could mount a defense.
In 2019, New York amended its COJ statute to prohibit entry of judgment based on a confession unless the debtor was a New York resident or the contract had a substantial New York nexus. The change effectively killed the COJ as a national enforcement tool.
What replaced it
- ▸Aggressive UCC enforcement (lockbox arrangements, bank account freezes via writs)
- ▸Personal guarantee enforcement against the owner individually
- ▸Collection litigation in the merchant's home state — slower, more expensive, but legitimate
- ▸Forbearance and restructuring offers as the first response to default
Operational impact
Default recoveries are slower and more expensive in 2026 than they were pre-2019. Underwriting tightened in response — lower max deal sizes, stronger personal guarantees, more conservative factor rates on weaker paper. The industry is healthier and less litigious than it was, even if the unit economics are tighter.
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