Confessions of judgment may no longer be permitted as part of the necessary documents when buying or selling financial services or products to consumers in New York. Senate bill S2632 is another overt action taken by New York state to limit the entry of judgments without due process to the borrower or debtor.
A confession of judgment is a document signed by an individual either on their own behalf, as an officer of a company, or both. If worded correctly, an affidavit of confession of judgment will allow a creditor to enter judgment without further notice and/or without the necessity of providing any evidence or proof of the debt or default in order for the clerk of the court to enter judgment.
A judgment entered based upon a confession of judgment is a valid judgment. New York no longer accepts confessions of judgments signed outside of New York state. The law is applicable in commercial and consumer arenas.
It should be noted that New York does not allow creditors and their agents to convert out-of-state judgments entered by consent or confession. A proceeding on the judgment is needed to domesticate the judgment here.
The proposed bill does not currently apply to commercial lenders. Therefore, it will most likely be “business as usual” for commercial lenders and the like.
Senate Bill S2632 is another step taken to protect consumers in New York state following the enactment of the Consumer Credit Fairness Act. The bill does not prohibit creditors and consumer debtors from including confessions of judgments as part of repayment agreements and more.
Senate bill S2632 applies to financial products and services, which it defines as:
“ (A) “FINANCIAL PRODUCT OR SERVICE” SHALL MEAN ANY FINANCIAL PRODUCT OR FINANCIAL SERVICE OFFERED OR PROVIDED BY ANY PERSON REGULATED OR REQUIRED TO BE REGULATED BY THE SUPERINTENDENT OF FINANCIAL SERVICES PURSUANT TO THE BANKING LAW OR THE INSURANCE LAW OR ANY FINANCIAL PRODUCT OR SERVICE OFFERED OR SOLD TO CONSUMERS EXCEPT FINANCIAL PRODUCTS OR SERVICES: (I) REGULATED UNDER THE EXCLUSIVE JURISDICTION OF A FEDERAL AGENCY OR AUTHORITY, (II) REGULATED FOR THE PURPOSE OF CONSUMER OR INVESTOR PROTECTION BY ANY OTHER STATE AGENCY, STATE DEPARTMENT OR STATE PUBLIC AUTHORITY, OR (III) WHERE RULES OR REGULATIONS PROMULGATED BY THE SUPERINTENDENT OF FINANCIAL SERVICES ON SUCH FINANCIAL PRODUCT OR SERVICE WOULD BE PREEMPTED BY FEDERAL LAW.
(B) “FINANCIAL PRODUCT OR SERVICE REGULATED FOR THE PURPOSE OF CONSUMER OR INVESTOR PROTECTION”: (I) SHALL INCLUDE (A) ANY PRODUCT OR SERVICE FOR WHICH REGISTRATION OR LICENSING IS REQUIRED OR FOR WHICH THE OFFEROR OR PROVIDER IS REQUIRED TO BE REGISTERED OR LICENSED BY STATE LAW, (B) ANY PRODUCT OR SERVICE AS TO WHICH PROVISIONS FOR CONSUMER OR INVESTOR PROTECTION ARE SPECIFICALLY SET FORTH FOR SUCH PRODUCT OR SERVICE BY STATE STATUTE OR REGULATION AND (C) SECURITIES, COMMODITIES AND REAL PROPERTY SUBJECT TO THE PROVISIONS OF ARTICLE TWENTY-THREE-A OF THIS CHAPTER, AND (II) SHALL NOT INCLUDE PRODUCTS OR SERVICES SOLELY SUBJECT TO OTHER GENERAL LAWS OR REGULATIONS FOR THE PROTECTION OF CONSUMERS OR INVESTORS.”
Most likely a variation of the bill will be signed. It will be interesting to track the bill as it passes the assembly and is signed by the Governor to see if it is expanded to the commercial context or includes small business owners guaranteeing a debt on behalf of their business. We will continue to share updates as they become available.
