Relates to certain judgments by confession

◆ The sponsor's argument

Why Liz Krueger says this is needed

A confession of judgment is a written and signed statement, in the form of an affidavit, in which a debtor admits liability and agrees to pay the sum confessed as owed to the creditor pursuant to an agreement. A confession of judgment is a legitimate tool that may facilitate commer- cial transactions, resolve or avoid litigation, support collection of moneys owed under an equitable distribution plan, or ensure that govern- ment agencies can recover funds on behalf of victims. When the debtor does not per form or pay according to the agreement, a confession may be filed as a judgment with the county clerk, even in the absence of a pending court action. Prior to 2019, creditors with no nexus to New York were obtaining judge- ments against out-of-state debtors in New York courts because NY had the most permissive confession of judgment statutes in the nation. Chapter 214 of the laws of 2019 closed the out-of-state pipeline of cases, but left a loophole that allowed New York businesses open to such judgements by New York courts. This bill closes that loophole through codifying a federal rule to ban the use of confessions of judgments on amounts due from individuals for family, household, consumer, investment, or other non-business uses. The bill also bars confessions of judgements on any debt less than $5 million. Confessions of judgement are a useful tool for some consumer credit transactions, but should be restricted for small dollar debt incurred by small businesses.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.