Glossary
What is a confession of judgment (COJ)?
How COJs work
A confession of judgment clause in an MCA agreement means the merchant, by signing the agreement, authorizes the funder's attorney to appear in court and confess judgment against them — without the merchant being served, appearing, or having an opportunity to contest the claim before judgment is entered. The funder can then immediately enforce the judgment, including wage garnishment, bank levies, and liens on property.
COJs dramatically reduce the time and cost of collections for funders. From the merchant's perspective, they provide essentially no procedural protections — the judgment exists before the merchant knows about it.
Current legal landscape for COJs in MCA
New York historically permitted COJs and was a common filing jurisdiction for MCA funders nationwide. Following regulatory scrutiny and legislative action beginning in 2019, New York restricted COJs to prohibit their use against non-resident defendants — a change that significantly reduced their utility for MCA funders because most merchants are not New York residents. Other states have varying COJ rules; some prohibit them entirely, some permit them with restrictions. As of 2026-06-16, the enforceability of COJ provisions varies significantly by jurisdiction — verify current law with qualified counsel.
FAQ
Confession of Judgment (COJ) — common questions
Are confessions of judgment still used in MCA agreements?
Some agreements still include COJ provisions, though their utility is substantially narrowed by New York's 2019 restrictions and variations in other states. Funders should evaluate whether COJ clauses in their agreements are actually enforceable in the relevant jurisdiction — an unenforceable provision provides false security.
What alternatives do funders have for rapid collections without a COJ?
Alternatives include arbitration clauses with emergency relief provisions, UCC enforcement against collateral, and standard litigation — though each is slower or more costly than a functioning COJ. The practical shift has been toward stronger pre-funding underwriting and stacking detection rather than relying on post-default remedies.
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