Confession of Judgment (COJ)
A Confession of Judgment (COJ) is a legal document signed by an MCA borrower at origination pre-agreeing to entry of judgment against them in event of default — historically allowing funders to obtain enforceable judgments in hours rather than months — significantly restricted after New York's 2019 ban.
Why This Matters
COJs were the MCA industry's collection accelerator for two decades. By pre-signing a COJ, the merchant waived contestation rights — funders could file the COJ in court upon default and obtain a judgment without notice or trial. New York's 2019 legislation banned COJs against out-of-state defendants in NY courts, where most COJs were filed. The industry response: some funders shifted COJ filings to other jurisdictions (NJ, FL, PA); others abandoned COJ practices entirely. Regulatory and reputational pressure continues pushing the industry away from COJ — most reputable modern funders now operate without COJ provisions.
Example
Pre-2019: Merchant defaults on $50K MCA. Funder files pre-signed COJ in NY court. Judgment entered same day for $42K outstanding balance plus fees. Funder begins immediate enforcement (bank account garnishment, asset levies). Post-2019: same scenario requires standard litigation processes taking 30-180 days, with merchant having full contest rights.
Frequently Asked Questions
Frequently Asked Questions
Are COJs still used in MCA?
Significantly reduced post-2019 NY ban but not eliminated. Some funders use COJs in non-NY jurisdictions (NJ, FL, PA) where enforceable. Others have eliminated COJ provisions entirely from agreements. Reputational and regulatory pressure continues to push the industry away from COJ practices.
What collection mechanisms replaced COJs?
Personal guarantees combined with standard litigation. UCC enforcement against secured receivables. ACH debit authorizations with default acceleration. Lockbox structures controlling deposits. Standard judgment proceedings. None match COJ speed individually but together provide robust collection processes.