Niou, DenDekker, Wright, Wallace, Schimminger, Kim
MLTSPNSR
Amd §3218, CPLR
Relates to judgment by confession; allows a government agency engaged in the enforcement of a civil or criminal law to file an affidavit in any county.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7500A
SPONSOR: Dinowitz TITLE OF BILL: An act to amend the civil practice law and rules, in
relation to judgment by confession
This proposal is one in a series of measures being introduced at the
request of the Chief Administrative Judge upon the recommendation of his
Advisory Committee on Civil Practice.
This measure would amend section 3218 of the Civil Practice Law and
Rules to remedy abuses in the use of confessions of judgment by credi-
tors against out-of-state debtors. This measure is in response to recent
press reports regarding creditors that execute confessions of judgment
in New York State even though the associated agreement or debtor have no
nexus to the State.{1}
Under the current statute, 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 commercial transactions, resolve or avoid liti-
gation, support collection of moneys owed under an equitable distrib-
ution plan, or ensure that government 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.{2}
But, in recent years, creditors, often from out-of-state, have entered
confessions of judgment in various New York counties against debtors who
themselves are out-of-state small business owners with no connection to
New York. This practice has resulted in some unscrupulous creditors
using New York law and procedure to freeze and then seize debtors'
assets based on a judgment entered in a venue far from where the agree-
ment was executed and the parties reside, making it difficult for a
debtor to contest abusive conduct by a creditor.
This measure seeks to correct such abuse without frustrating legitimate
use of confessions of judgment within the State. It limits the venue for
filing a confession of judgment to in-state debtors, based on where the
debtor resided at the time the affidavit was executed or, if the debtor
moves, where he or she resides at the time of filing the judgment. This
approach is intended to prevent creditors from abusing confessions of
judgment by using New York courts as a venue to profit from debtors with
no New York connection.
Under this measure, a non-natural person, such as a corporation, would
be deemed to reside in the county where it has a principal place of
business.
This measure would provide an exemption for government agencies engaged
in enforcing civil or criminal law against a person or non-natural
person. Government agencies often use confessions of judgment to ensure
that they can recover assets to pay, for example, restitution to
victims. Therefore, the proposal would permit government law enforcement
agencies to enter such judgments in any county within the State.
This measure, which would have no fiscal impact, would take effect imme-
diately and apply to judgments by confession filed on or after the
effective date.
:LEGISLATIVE HISTORY;:US OFF;:
NONE. NEW PROPOSAL.
(*) ZACHARY R. MIDER AND ZEKE FAUX, 'SIGN HERE TO LOSE EVERYTHING',
BLOOMBERG BUSINESSWEEK (ONLINE, NOVEMBER 20, 2018), HTTPS://WWW.BLOOM
BERG.COM/GRAPHICS/2018-CONFESSIONS-OFJUDGMENT/?SRND=CONFESSIONS-OF-JUD
GMENT.
(**) IN THE MID-1980S, THE FEDERAL TRADE COMMISSION (FTC) BANNED
CONFESSIONS OF JUDGMENT IN CONSUMER TRANSACTIONS AND BANK TRANSACTIONS:
"(I)T IS AN UNFAIR ACT OR PRACTICE WITHIN THE MEANING OF SECTION 5 OF
(THE FTC) ACT FOR A LENDER OR RETAIL INSTALLMENT SELLER DIRECTLY OR
INDIRECTLY TO TAKE OR RECEIVE FROM A CONSUMER AN OBLIGATION THAT: 1)
CONSTITUTES OR CONTAINS A COGNOVIT OR CONFESSION OF JUDGMENT (FOR
PURPOSES OTHER THAN EXECUTORY PROCESS IN THE STATE OF LOUISIANA),
WARRANT OF ATTORNEY, OR OTHER WAIVER OF THE RIGHT TO NOTICE AND THE
OPPORTUNITY TO BE HEARD IN THE EVENT OF SUIT OR PROCESS THERE ON." (16
CFR 444.2.)
STATE OF NEW YORK
________________________________________________________________________
7500--A
2019-2020 Regular Sessions
IN ASSEMBLY
May 7, 2019
___________
Introduced by M. of A. DINOWITZ, NIOU, DenDEKKER, WRIGHT, WALLACE,
SCHIMMINGER -- (at request of the Office of Court Administration) --
read once and referred to the Committee on Judiciary -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee
AN ACT to amend the civil practice law and rules, in relation to judg-
ment by confession
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph 1 of subdivision (a) and subdivision (b) of
2 section 3218 of the civil practice law and rules, paragraph 1 of subdi-
3 vision (a) as amended by chapter 311 of the laws of 1963, are amended to
4 read as follows:
5 1. stating the sum for which judgment may be entered, authorizing the
6 entry of judgment, and stating the county where the defendant resides
7 [or if he is a non-resident, the county in which entry is authorized];
8 (b) Entry of judgment. At any time within three years after the affi-
9 davit is executed, it may be filed, but only with the clerk of the coun-
10 ty where the [defendant] defendant's affidavit stated [in his affidavit
11 that he] that the defendant resided when it was executed or[, if the
12 defendant was then a non-resident, with the clerk of the county desig-
13 nated in the affidavit] where the defendant resided at the time of
14 filing. [Thereupon the] The clerk shall then enter a judgment in the
15 supreme court for the sum confessed. [He] The clerk shall tax costs [to]
16 in the amount of fifteen dollars, besides disbursements taxable in an
17 action. The judgment may be docketed and enforced in the same manner
18 and with the same effect as a judgment in an action in the supreme
19 court. No judgment by confession may be entered after the defendant's
20 death. For purposes of this section, a non-natural person resides in
21 any county where it has a place of business.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11359-02-9
A. 7500--A 2
1 Notwithstanding any other provision of law to the contrary, a govern-
2 ment agency engaged in the enforcement of civil or criminal law against
3 a person or a non-natural person may file an affidavit in any county
4 within the state.
5 § 2. This act shall take effect immediately and apply to judgments by
6 confession entered upon affidavits filed on or after such effective
7 date.
