For unsuspecting (and often desperate) small business owners who took out Merchant Cash Advances as a lifeline to save their livelihood, the filing of a Confession of Judgment (COJ) becomes the businesses deathblow.
On June 20, 2019, the New York State legislature passed Bill S6395, effectively ending the heinous COJ practice for most borrowers. With Governor Cuomo’s signature on August 30, 2019, Confessions of Judgment are no longer allowed to be filed in New York against non-residents.
In summary, a COJ is a document a borrower is required to sign as part of a Merchant Cash Advance application whereby the borrower agrees (in advance) to lose any dispute, a practice brought to light (and to the attention of NY legislators) by Bloomberg in their exposé Sign Here to Lose Everything.
When a business defaulted on an MCA payment – or even if the lender suspects that they might – the COJ was filed and rubber-stamped in a lender-friendly court in New York without the borrower’s knowledge or ability to defend themselves in a distant state. Armed with the executed COJ, the MCA then was able to extract all their money - along with interest and exorbitant fees - from the unsuspecting borrower’s bank. It was game over for the business.
While the law’s passage does make it more difficult for MCA lenders, they still have other legal options and will continue to aggressively collect.
If you are already caught in the merchant cash advance snare, there are options to stop lender harassment, negotiate a reduced settlement, and even regain access to frozen bank accounts. Don’t wait until it's too late - MCA lenders have aggressive attorneys on their side, so should you.
Free consultations and case reviews are available to determine the best course of action for your unique situation.