The confession of judgment is not permanent. It presents itself as an inevitability, a document signed in haste and filed without contest, but the law does not treat inevitability as a category. What the law treats is procedure, and procedure is where these instruments fail.
When a merchant cash advance funder obtains a confession of judgment, it enters the record as though the dispute were already settled. No hearing. No notice. No opportunity to be heard. The merchant signed an affidavit at the inception of the agreement authorizing the entry of judgment upon default. By the time you learn the judgment exists, it may have been docketed, your bank account restrained, your receivables intercepted. The architecture of the confession is designed to produce this sensation of completion.
But a filed document is not a final document.
The Affidavit Must Satisfy CPLR 3218
Under New York Civil Practice Law and Rules Section 3218, a confession of judgment affidavit must state the sum for which judgment may be entered, authorize entry of that judgment, identify the county of the defendant's residence, and set forth the facts from which the debt arose with sufficient concision to demonstrate that the amount confessed is justly due. These are not suggestions. They are statutory predicates.
Where the affidavit designates multiple counties, or omits the factual recitation, or states an amount that does not correspond to the contractual obligation, the instrument is defective. In GTR Source, LLC v. Futurenet Group, Inc., the court addressed whether an affidavit naming six counties rather than one satisfied the statute. The procedural question of standing complicated the outcome, but the deficiency was not disputed. Deficiency is the opening.
And the statute carries a temporal limitation that many funders disregard. A confession of judgment filed more than three years after the affidavit was executed is void. Not voidable. Void.
Recharacterization Dissolves the Instrument
The more consequential challenge is substantive. If the merchant cash advance agreement is not, in its operation, a purchase of future receivables but rather a loan, then usury law applies. In New York, a loan carrying an interest rate exceeding 25 percent per annum constitutes criminal usury under Penal Law Section 190.40. A criminally usurious loan is void ab initio. One cannot confess to a judgment arising from an obligation that never existed.
The question is not what the contract says. The question is what the contract does.
In Davis v. Richmond Capital Group, LLC, the Appellate Division, First Department held that plaintiffs stated a claim that the agreements were loans, relying on the discretionary nature of reconciliation provisions, allegations that the funder refused to permit reconciliation, daily payment rates that bore no relationship to a good faith estimate of actual receivables, and provisions making rejection of automated debits an event of default. Where the funder retains absolute repayment regardless of the merchant's revenue, the transaction is a loan. Where the transaction is a loan at 4,000 percent annualized interest, it is void.
The Attorney General of New York made this argument against Richmond Capital Group and prevailed. The judgment exceeded $77 million. The court cancelled all outstanding debts. 3,000 transactions unwound because the instrument at their center was a fiction.
The 2019 Amendment Eliminated Jurisdiction Over Nonresidents
Before 2019, a funder in New York could file a confession of judgment against a merchant in Texas, Florida, Oregon, anywhere. The merchant, having signed an affidavit designating a New York county, would discover a judgment entered 1,200 miles from their place of business. Bloomberg Businessweek documented thousands of these filings in a 2018 investigation. The legislature responded.
The amendment to CPLR 3218 now provides that a confession of judgment affidavit may be filed only in the county where the defendant resided at the time of execution or at the time of filing. If you operated a restaurant in Miami and signed an MCA agreement with a New York funder, the confession filed in Westchester or Rockland County is unenforceable. It was always aggressive. Now it is impermissible.
In January 2025, Attorney General James secured a $1.065 billion judgment against the Yellowstone Capital network, a constellation of 25 entities. The settlement discharged over 1,100 judgments in New York and over 18,000 across the country. The court vacated the final batch of Yellowstone judgments in December of that year. These were not anomalies. They were confessions that should not have been filed in the first instance.
Vacatur Requires a Motion, Not a Complaint
The procedural mechanism for challenging a confession of judgment is a motion to vacate under CPLR 5015. This is not a lawsuit. It is a proceeding within the existing action, directed at the judgment itself. Grounds include lack of jurisdiction, excusable default, fraud, misrepresentation, or the judgment being founded upon a void obligation.
Timing matters. The merchant who discovers a restraint on a bank account in February has different options than the merchant who discovers one in September. The merchant who has been making daily payments through an ACH debit and receives a deficiency judgment after twelve months of compliance has different arguments still. Each of these situations produces a viable motion, but the motion must be constructed with precision.
There is a persistent misapprehension that the debtor cannot challenge the confession because the debtor signed it. GTR Source addressed this through the lens of standing, holding that the debtor may lack standing to challenge technical deficiencies in the affidavit. That is correct as far as it extends. But it does not foreclose a challenge on the ground that the underlying obligation is void, that default never occurred, or that the funder filed in a jurisdiction the statute no longer permits. The debtor who signed the confession is not the debtor who signed away all remedies.
What the Record Requires
To vacate a confession of judgment, one assembles documentation in this order. The original MCA agreement. The affidavit of confession. The certificate of disposition or judgment roll. Bank statements demonstrating actual payments made and the relationship between those payments and actual receivables. Correspondence, if any, requesting reconciliation. Evidence of the funder's refusal to reconcile. A calculation of the effective annual percentage rate.
47 percent of merchant cash advance agreements reviewed in the Yellowstone investigation carried effective interest rates above 200 percent. That number is not an abstraction. It is a number that, placed before a court, transforms the characterization of the transaction.
The motion papers themselves must demonstrate either procedural deficiency in the confession, substantive invalidity of the underlying obligation, or jurisdictional impropriety in the filing. Where all three converge, the motion is not a request. It is a formality.
The Instrument Was Designed to Discourage This Motion
One should understand that the confession of judgment exists as a mechanism of discouragement. It is not designed to be litigated. It is designed to make litigation appear futile. The merchant who opens a bank statement to find a zero balance and a judgment docketed in a county 900 miles away is not expected to retain counsel. The merchant is expected to absorb the loss. To close the business. To settle for whatever the funder demands.
That expectation is the product of a specific era in commercial financing, an era that the legislature, the Attorney General, and an increasing number of courts have determined is over. The confession is a relic of that era still circulating in active agreements, still being filed by funders who calculate that the cost of occasional vacatur is lower than the revenue generated by universal compliance.
They are not wrong about the calculation. They are wrong about the trend.
If a confession of judgment has been entered against your business, the question is not whether it can be challenged. The question is which of the available grounds applies to your particular instrument, and whether you bring the motion before the restraint becomes the disposition. Our firm evaluates these instruments and constructs the appropriate motion. The window is the document itself.