New York's 2019 COJ Reform: What It Means for MCA Defendants

Why the Reform Happened

Before 2019, MCA funders routinely required businesses across the country to sign confessions of judgment governed by New York law. When a business defaulted, the funder would file the COJ in a New York court, obtain a judgment without any proceeding, and use that judgment to freeze bank accounts nationwide. Businesses in Texas, California, and Florida found themselves subject to New York judgments they never had the opportunity to contest. Investigative reporting and legislative pressure led to the reform.

Key Provisions of the Reform

The reform addressed multiple aspects of COJ abuse. It imposed requirements on the content and form of confessions of judgment, created mandatory notice provisions so debtors would be informed when a COJ was filed, restricted the ability of filers to obtain judgments against out-of-state debtors, and established new grounds for vacatur. The reform also imposed consequences on filers who failed to comply with the new requirements.

Impact on MCA Defense

The reform shifted the landscape significantly in favor of MCA defendants. Many COJs filed after the reform’s effective date contain procedural defects that provide grounds for vacatur. Out-of-state businesses have particularly strong defenses. Even for COJs that comply with the reform’s requirements, the mandatory notice provisions give businesses an earlier opportunity to respond before accounts are frozen.

Using the Reform in Your Defense

If a COJ has been filed against your business, the first step is determining whether the filing complied with the 2019 reform requirements. Deficiencies in the filing, failure to provide required notice, or improper filing against an out-of-state business can all support a motion to vacate. An attorney can evaluate the specific filing and identify applicable grounds for challenge.