A confession of judgment (COJ), sometimes called a "cognovit note" or "warrant of attorney," is a contractual provision by which the debtor pre-consents to the entry of a court judgment against them upon default, without the customary lawsuit, notice, or opportunity to defend. Historically common in MCA contracts, the COJ has been substantially restricted by both state and federal authorities since 2019.
The mechanism. At signing, the merchant executes an "affidavit of confession of judgment" alongside the MCA contract. Upon merchant default, the funder files the affidavit with the court of the chosen jurisdiction (most commonly New York County or Erie County, NY, historically), and the court enters judgment immediately — no summons, no answer period, no hearing. The funder can then begin asset seizure, bank levies, and garnishment within days.
The 2019 New York reform. The pivotal change. Before 2019, New York courts accepted COJ filings from any jurisdiction. MCA funders structured contracts to require New York COJs even when neither party had any New York connection, creating an industry-wide practice of out-of-state merchants being sued in New York. New York CPLR § 3218 was amended effective August 30, 2019 to restrict COJ filings to those where the defendant is a New York resident at the time of execution. This eliminated approximately 95%+ of MCA COJ filings in New York within months and forced the industry to find alternatives.
The post-2019 state-by-state landscape (2026).
States banning or sharply restricting COJ (no general MCA enforceability): - California. COJ generally unenforceable except in narrow circumstances; consumer protection statutes apply. - New Jersey. Unenforceable in consumer contracts; commercial enforceability limited. - North Carolina. Generally prohibited. - Massachusetts. Cognovit clauses unenforceable. - Pennsylvania. Restricted; requires specific procedural compliance and waiver of rights. - Michigan. Generally prohibited. - Ohio. Restricted to specific circumstances with statutory warning requirements. - Illinois. Cognovit clauses heavily restricted. - Connecticut. Generally unenforceable in consumer transactions.
States with limited or conditional enforcement: - New York. COJ enforceable only against New York residents at time of execution (post-2019 reform). - Delaware. COJ enforceable; commonly used in commercial contracts. Many MCA funders moved to Delaware COJ structures after NY reform. - Maryland, Virginia, Texas. COJ enforceable but with procedural requirements.
States with broad enforcement: - Most states technically allow COJ in commercial contracts but with varying procedural requirements, statute-of-limitations issues, and consumer-protection carve-outs.
The federal context — FTC and state AG actions. Following the New York reform, the FTC and several state attorneys general brought enforcement actions against MCA funders for abusive COJ practices. Notable: - FTC v. RCG Advances (2020). $3.4M settlement over alleged COJ abuse, hidden fees, and unauthorized account withdrawals. - NY AG v. Yellowstone Capital (multiple actions 2020–2022). Substantial enforcement against MCA funders for COJ abuse, including over-collection and post-payoff COJ filings. - CFPB and state CFPB-equivalent actions. Multiple actions citing COJ structures as part of broader abusive collection patterns.
The post-reform industry adaptations. Since 2019, MCA funders have adapted by: 1. Moving to Delaware COJ structures. Delaware courts continue accepting COJ filings; many funders now use Delaware as the COJ jurisdiction. 2. Shifting to arbitration with default judgment provisions. Some funders moved to arbitration clauses with default-favorable provisions, replicating some COJ effects without using formal COJ. 3. Eliminating COJ entirely. Reputable funders increasingly market "no COJ" contracts as a selling point, particularly to brokers serving merchant-friendly markets. 4. Personal guarantee enforcement. Without COJ, funders rely more heavily on personal guarantees and standard collection litigation.
Specific state context. - New York merchants signing today should not see a New York COJ unless they are NY residents at signing — if presented with a non-NY-resident COJ, this is a red flag. - California merchants should not face enforceable COJs; California's commercial financing disclosure law adds APR-equivalent disclosure but does not address COJ directly because COJ is already restricted. - Florida, Texas, Georgia merchants may see Delaware COJ structures. The COJ would be enforced in Delaware court, not the merchant's state. - Delaware-formed entities are particularly vulnerable to Delaware COJ filings even when operating elsewhere — Delaware's expansive corporate jurisdiction extends to its own formed entities.
What merchants should do. 1. Read the COJ language before signing. Look for "confession of judgment," "cognovit," "warrant of attorney," or "consent to judgment" clauses. 2. Refuse COJ when possible. Many funders will remove COJ in exchange for slightly higher pricing or additional collateral. 3. Identify the jurisdiction. A Delaware COJ requires defense in Delaware court — far from most merchants' geographic base. 4. Consult counsel. Pre-signature legal review of MCA contracts with COJ provisions is increasingly standard for advances $250K+.
What brokers should do. 1. Disclose COJ presence to merchants as part of the offer comparison. 2. Favor no-COJ funders when fitting otherwise-qualified merchants — increasingly a market differentiator. 3. Track state-by-state enforceability — practice has shifted since 2019 and continues evolving.
Common confusion. First, "the COJ was banned" — only New York's broad use was reformed; COJs remain legally valid in many states with varying restrictions. Second, "my Delaware COJ doesn't apply because I'm in Florida" — Delaware courts accept the filing; you would need to defend in Delaware or move to vacate. Third, "I can fight the COJ in my home state" — the COJ judgment, once entered, can be domesticated in your home state and collection actions begin from there.
Related terms
- Confession of judgment (COJ) — A waiver where the merchant pre-agrees to a default judgment if they breach the MCA contract. Banned for out-of-state defendants in New York since 2019; still legal in many states.
- MCA judgment after default — The court judgment obtained by an MCA funder against a defaulted merchant — typically via confession of judgment (where allowed) or breach-of-contract civil action. Once entered, the judgment enables bank levies, UCC-1 lien enforcement, accounts-receivable attachment, and personal-asset pursuit against the guarantor.
- MCA default judgment protection — Default judgment protection in MCA context refers to legal strategies and assets that protect merchants and personal guarantors from full asset seizure after MCA default judgment. Protections include: (1) state-law exemptions (homestead, retirement, wages above certain thresholds), (2) business entity separation, (3) tenancy-by-entirety property held with spouse, (4) properly structured trusts, (5) bankruptcy protection. Effectiveness varies dramatically by state and pre-default planning quality.
- MCA judgment collections — The post-default process where a funder obtains and enforces a court judgment against the merchant and personal guarantor — typically using bank levies, receivables liens, asset seizure, and wage garnishment under UCC Article 9 and state judgment-enforcement law.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/confession-of-judgment-state-by-state.