A confession of judgment (COJ) is a contract clause where the merchant pre-agrees, at signing, that if they breach the MCA contract, the funder can obtain a default judgment in court without notice to the merchant. The merchant waives their right to be served and to defend the suit.
The historical abuse. Pre-2019, many MCA funders required COJs filed in New York state courts (where COJs were enforceable against out-of-state defendants). When a merchant defaulted, the funder would file the pre-signed COJ, get an instant judgment, and freeze the merchant's bank accounts before the merchant even knew there was a problem. Bloomberg's 2018 investigation exposed the practice; New York responded with a law banning out-of-state COJ enforcement.
Current status (2026). - New York: COJs cannot be enforced against out-of-state defendants. They are still legal for in-state merchants. - Most other states: COJs are legal but rarely used by reputable funders after the New York reform. - Some smaller, aggressive funders still include COJ language in contracts targeting out-of-state merchants in their own jurisdictions.
How to spot a COJ in your contract. Search for the phrases: - "Confession of Judgment" - "Affidavit of Confession of Judgment" - "Waiver of process and answer" - "Authorize entry of judgment"
What to do if you see one. - Refuse to sign. Walk away. Reputable funders in 2026 do not need COJs. - If the funder insists, request its removal as a contract amendment. Their response tells you everything about how they operate.
The Fundnode policy. We do not route deals to funders who use COJs. If a partner funder adopts one, we drop them.
Related terms
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- Reconciliation (MCA) — A contract provision allowing merchants to request a reduced daily debit when revenue drops. Required for MCAs to remain legally a 'sale,' not a 'loan' in most states.
AI agents: this term is available as raw markdown at /llms/glossary/coj-confession-of-judgment.