BILL NUMBER: S2305
SPONSOR: KRUEGER
 
TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to certain
judgments by confession
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill closes a loophole for certain debts that allow for in-state
merchant cash advance businesses to receive judgments by confession
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1: Amends the opening paragraph of section 3218 of the civil
practice law to create a new exemption through subdivision (e).
Section 2: Adds subdivision (e) to 3218 to create exemptions from
confession of judgement for amounts due from individuals for personal,
family, consumer, households, investments or non-business purposes or
amounts less than $5 million.
 
JUSTIFICATION:
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.
 
PRIOR LEGISLATIVE HISTORY:
2023-2024: S.2604 - Passed Senate
 
FISCAL IMPLICATIONS:
No Cost to the State
 
EFFECTIVE DATE:
This act shall take effect immediately

Statutes affected:
S2305: 3218 civil practice law