# 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.

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)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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)](https://fundnode.co/llms/glossary/reconciliation) — 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.

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Source: https://fundnode.co/glossary/coj-confession-of-judgment (HTML version)
Document: Confession of judgment (COJ) — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.