Confession of Judgment: What It Is and Why It's Dangerous
A Confession of Judgment (COJ) is a clause buried in many MCA contracts that allows the lender to obtain a court judgment against you without notice, without a hearing, and without giving you a chance to defend yourself.
What is a Confession of Judgment?
When you sign a contract containing a COJ, you're pre-authorizing the lender to file a judgment in court if they claim you defaulted. You waive your right to be served, to appear, and to present a defense.
Why COJs are dangerous
If you miss a payment — or if the lender claims you did — they can go directly to a court, get a judgment, and freeze your bank accounts before you even know what happened. Small businesses have lost everything this way.
New York's 2019 ban
New York banned COJ enforcement against out-of-state borrowers in 2019 after widespread abuse. But many MCA contracts still include this clause. If your contract has a Confession of Judgment, that's a serious red flag. Upload your contract to our free analyzer to see if you have one.
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FundingWatch Research Team
Our team analyzes MCA contracts, regulatory actions, and borrower rights so small business owners have the facts they need to make informed decisions.