Res. No. 243-A
Resolution calling upon the New York State Legislature to pass, and the Governor to sign, S.5256/A.7196, to prohibit the use of a confession of judgment in business loans.
By Council Member Menin, the Public Advocate (Mr. Williams) and Council Members Abreu, Sanchez, Cabán, Louis, Rivera, Velázquez and Lee
Whereas, Many taxi medallions owners in New York City (NYC) have taken out business loans to finance the purchase of their vehicles; and
Whereas, Some of the business loans that medallion owners take out include a document known as a “confession of judgment,” where the borrower waives the right to due process if the debt is unpaid and there is a dispute; and
Whereas, Once signed, a confession of judgment can be used by the lender to obtain a judgment against the borrower without any further notification; and
Whereas, Confessions of judgement enable creditors to legally seize assets of borrowers without a court proceeding, by enabling lenders to claim a debtor failed to meet their payment obligations; and
Whereas, The Federal government currently has prohibitions on the use of confessions of judgment in consumer loans, but not for business loans; and
Whereas, The United States Federal Trade Commission has called for the elimination of confessions of judgment in small business lending contracts; and
Whereas, Many states have also banned confessions of judgment practices for business loans, but New York State (NYS) does not prohibit them; and
Whereas, On August 30, 2019, then-Governor Cuomo signed S.6395/A.7500A, relating to judgements by confession; and
Whereas, The State bills prohibit out-of-state lenders from entering into confessions of judgement in New York counties against debtors; and
Whereas, Confessions signed by parties that are New York residents at the time of signing remained enforceable; and
Whereas, A confession of judgment can be used by banks and other lending institutions as a document in predatory lending practices, a loophole that should be closed; and
Whereas, A.7196, introduced by NYS Assembly Member Jeffrey Dinowitz, and S.5256, introduced by NYS Senator James Sanders Jr., would prohibit the inclusion of a confession of judgement in a contract or agreement for a financial product or service; and
Whereas, The legislation would apply to lenders and debtors that reside in NYS; and
Whereas, The legislation will protect small businesses from predatory lenders that offer loans and cash advances on the pre-condition the business signs a confession of judgment; now, therefore, be it
Resolved, That the Council of the City of New York calls upon the New York State Legislature to pass, and the Governor to sign, S.5256/A.7196, to prohibit the use of a confession of judgment in business loans.
Session 12
NM
LS #1,981
4/18/2022
Session 11
RA
LS # 9151, 9153, 11030, 11060
Res 1049-2019