1 00:00:04.860 --> 00:00:11.820 Christopher Murray: Welcome, everyone. This is the confession of judgment panel, we're talking about the state of confessions of judgment in New York, I do want 2 00:00:11.820 --> 00:00:21.150 to point out that this is a New York centric topic, because there are confessions of judgments in other states, and they're just not all that common within the 3 00:00:21.150 --> 00:00:30.090 MCA space within the alternative financing space. So we're focusing on New York State confessions of judgment. I'm going to introduce Steve Berkovitch 4 00:00:30.090 --> 00:00:36.929 Steven Berkovitch: Steven Berkovitch, Partner, Berkovitch & Bouskila. We specialize in the MCA industry, collections, contracts, litigation, pretty 5 00:00:36.929 --> 00:00:39.149 much anything required to get you your money back. 6 00:00:40.950 --> 00:00:41.940 Christopher Murray: Katherine Fisher. 7 00:00:42.030 --> 00:00:48.600 Katherine Fisher: I'm Kate Fisher. I'm a Partner at Hudson Cook. My law practice focuses on merchant cash advance and alternative business lending. 8 00:00:49.230 --> 00:00:50.280 Christopher Murray: And Lindsey Rohan. 9 00:00:50.340 --> 00:00:56.430 Lindsey Rohan: Yes, Lindsey Lohan General Counsel to Platinum Rapid Funding Group, a funding entity on Long Island. 10 00:00:58.040 --> 00:01:03.710 Christopher Murray: So we're going to start off with a little bit of the history of confessions of judgment in New York. And you're may think, well, confessions of 11 00:01:03.710 --> 00:01:12.290 judgment, relatively new concept we've seen in the within the MCA space, since about 2012, I think was the first confession of judgment filed within the industry. 12 00:01:12.830 --> 00:01:20.720 I'm going to tell you that confessions of judgment are much older, they do date back to the Middle Ages, they've been around for a very long time. They are 13 00:01:20.720 --> 00:01:28.430 something that has been ingrained in New York law. And in fact, there is an enormous body of law and confessions of judgment in New York, which makes it a 14 00:01:28.430 --> 00:01:38.510 topic which we can all talk and sort of wax poetic about at some length. As far as the MCA industry is concerned, seems like every inch of every issue the MCA 15 00:01:38.510 --> 00:01:49.940 industry comes up with there is a brand new body of law for and the confession of judgment space. For whatever reason, the MCA industry just manages to come up with 16 00:01:49.940 --> 00:01:58.640 brand new issues, despite 700 years of case law going back to you know, merry old England, we somehow have never come up with before. There are some issues that 17 00:01:58.640 --> 00:02:07.730 we've come up with in the past. But for the most part, the MCA space has really managed to challenge the court system and really managed to challenge what the law is, 18 00:02:08.600 --> 00:02:19.790 as far as confessions of judgment, what are they in New York, it's typically just an affidavit. The affidavit says a handful of key facts, I owe X number of dollars 19 00:02:19.790 --> 00:02:31.730 to Y person for the following reasons. I'm a resident of New York, and therefore, my county of residence is say Nassau County, therefore a judgment by confession 20 00:02:31.730 --> 00:02:39.680 is authorized against me and Nassau County, they generally speaking, don't say a whole lot more than that, you'll read what a confession of judgment says. 21 00:02:39.800 --> 00:02:48.650 And I'm sure you've all seen, can you all raise your hand if you've actually seen an affidavit confession of judgment? Pretty much all of you. They basically only 22 00:02:48.650 --> 00:02:55.790 say the same thing. And if you notice, a confession of judgment generally fits on two to three pages. There's not a whole lot there. It's a fairly straightforward 23 00:02:55.790 --> 00:03:04.490 process. And despite the fact that it's a straightforward process, it manages to be an issue that comes up with every crazy legal challenge you can come 24 00:03:04.490 --> 00:03:14.960 up with. And some of the most recent legal challenges in the field are not MCA related, but they have analogies to MCA cases. So I want to go over a few of 25 00:03:14.960 --> 00:03:24.800 these is my favorite case is a case that involves a law firm that accepted a confession of judgment from a delinquent client. Now, you may say, well, this has 26 00:03:24.800 --> 00:03:35.030 nothing to do with with MCA space, you're gonna get to this in just a moment. If the merchant or the clients in this particular case says, well, I can't actually 27 00:03:35.030 --> 00:03:43.070 pay my bill, I'll sign the affidavit of confession of judgment for the legal fees. We don't know what the total amount is going to be. We'll leave that blank, 28 00:03:43.070 --> 00:03:51.590 and we'll agree on it on a later date. Okay, that sounds fine. There's only one thing they just signed an affidavit of confession of judgment, they left it blank 29 00:03:51.620 --> 00:04:02.810 on the crucial feature, which is how much is actually due, who, well, later on the parties that got together. The law firm says you owe us X, the client says, well, 30 00:04:02.810 --> 00:04:13.490 I don't know if that's correct, but I'm certainly not going to fight you over it. It sounds fine. The law firm fills it out, gets the clients consent, files the 31 00:04:13.490 --> 00:04:21.380 confession of judgment. And lo and behold, subsequently, the confession of judgment gets vacated, because you cannot fill out the affidavit of confession 32 00:04:21.380 --> 00:04:29.210 of judgment on a later date. And you may say, well, okay, obviously, you shouldn't be tampering with an affidavit. And you'd be dead right? You should not be 33 00:04:29.210 --> 00:04:37.490 changing an affidavit after it's been signed and notarized. That is a fabulous takeaway, that somehow a major law firm failed to understand. So that's 34 00:04:37.490 --> 00:04:44.750 something that everyone should know. Once the merchant has signed the affidavit confession of judgment, it should never be changed. If you need a new affidavit 35 00:04:44.750 --> 00:04:52.550 confession of judgment, you're going to require them to actually sign a brand new affidavit, you cannot make changes. And I say that because there have been one or 36 00:04:52.550 --> 00:05:02.630 two cases over the years, where an allegation was that the confession of judgment was modified in some way. Don't fall into that trap. Don't be the fools in that 37 00:05:02.630 --> 00:05:11.810 situation. Even if the merchant says it's okay. It's not okay. It will be a problem, it will cause your judgment to be thrown out. It's something that's going 38 00:05:11.810 --> 00:05:21.980 to be a real issue for you. The next case I really want to talk about is a matter that is near and dear to everyone's heart. It has to do with a usury challenge. 39 00:05:22.670 --> 00:05:34.430 This is a non MCA case. It's actually a lending space case, but it illustrates my point rather well. This is called Marazzo, Morocco vs. Marazzo. And in this case, 40 00:05:34.460 --> 00:05:44.810 there was an affidavit confessional judgment, on a loan judgment gets entered, the merchant comes back and makes the argument, the transaction was usurious. And 41 00:05:44.810 --> 00:05:52.790 the amount on the judgment is overinflated. How many people in this room have heard that argument before when a merchant has actually raised that at some point 42 00:05:52.790 --> 00:05:54.080 in time you want to raise your hands. 43 00:05:55.490 --> 00:05:57.440 I suspect most of you don't want to raise your hands. 44 00:05:59.190 --> 00:06:08.100 Unknown: But with regard to in this particular case, everyone agreed. In fact, the affidavit of confession of judgment was in and the ultimate judgment were in 45 00:06:08.100 --> 00:06:17.550 fact a little inflated. The parties agreed to this. They went ahead and they agreed to amend the judgment. The merchant then went ahead and forward with his 46 00:06:17.550 --> 00:06:27.720 challenge on usury. The court ruled something that we've all heard before. You can't make a motion to vacate a judgment by confession on a usury challenge. 47 00:06:27.870 --> 00:06:39.090 You just can't do it. This is the Appellate Division - Second Department and saying you are required to sue the lender in this particular case, and argue that they 48 00:06:39.090 --> 00:06:46.980 have violated the usury laws of the state, you don't get to make a mere post judgment motion. If you represent an MCA company, if you represent a lender, if 49 00:06:46.980 --> 00:06:55.410 you are a lender and MCA company, you've probably had a usury challenge at some point in time thrown out for this reason. And the reason I bring this up is you're 50 00:06:55.410 --> 00:07:05.880 probably familiar with one or two cases that have cropped up over the last few years, where a merchant made a motion, was able to get a judgment vacated on 51 00:07:05.880 --> 00:07:15.420 the grounds that it was a usurious loan and those would seem to indicate that the appellate courts in New York would rule those decisions to be procedurally wrong, 52 00:07:15.420 --> 00:07:24.030 whether or not they're substantively wrong. I think time will tell I would suggest to you that they are wrong. I represent MCA companies and lenders. So I'm 53 00:07:24.030 --> 00:07:33.240 certainly not going to suggest that they're right. But that said, it is a matter where the courts have seemed to indicate that procedurally they do have to file a 54 00:07:33.240 --> 00:07:41.220 lawsuit against you. And you may say, well, that should just pose to the matter. You've probably now realized there have now become a number of lawsuits against MCA 55 00:07:41.220 --> 00:07:51.870 companies over the last few years. This is in fact a byproduct of this line of case law saying you are required to have a plenary action. And so I really want 56 00:07:51.870 --> 00:07:59.550 to point out that the confession of judgment, CNC at the root of a lot of the more complex issues, it also seems to be an area where you see a lot more 57 00:07:59.550 --> 00:08:09.360 challenges. Another thing that we're also running into, and this is everyone's favorite topic, confessions of judgment, authorizing entry of judgment in multiple 58 00:08:09.360 --> 00:08:17.850 counties. You've all probably seen this, I say you've all probably seen it because I've seen virtually every affidavit of confession of judgment used by virtually 59 00:08:17.850 --> 00:08:28.050 every company. maybe one or two of you will use one county. The reason I bring this up is there is a law, the law for confessions of judgment makes reference to 60 00:08:28.110 --> 00:08:38.430 the county. Now the county sounds like a singular usage. This is within the affidavit the confession of judgment law in New York, say okay, the county, what's 61 00:08:38.430 --> 00:08:46.980 to stop me from saying multiple counties? Well, there are some trial court decisions in New York to say multiple counties totally okay, as long as they 62 00:08:46.980 --> 00:08:55.200 identify it within the affidavit of confession of judgment. The I reason I want to bring this up is there will be some case law coming out of the fourth 63 00:08:55.200 --> 00:09:03.300 department, which is in western New York, that's where Erie County that's where Niagara County are located, where many of the industries confessions of judgment 64 00:09:03.330 --> 00:09:12.270 actually get filed. We may find out whether or not this is definitively the law or not whether you can use multiple counties. If you can't use multiple counties, 65 00:09:12.270 --> 00:09:21.300 I suspect there will be a lot more litigation and everyone's future. If you can use multiple counties, not really a problem. The law is what we've all thought 66 00:09:21.300 --> 00:09:30.900 it was for the last several years, and we need not worry about it too much. Now, those are three important sets of cases. That we're seeing for the confession of 67 00:09:30.900 --> 00:09:38.970 judgments. I do want to now move on to Mr. Berkovitch, who's going to tell us about some of the litigation and some of the collections matters involving confessions 68 00:09:38.970 --> 00:09:39.420 of judgment. 69 00:09:39.510 --> 00:09:48.420 Steven Berkovitch: Thank you, Chris. So what are the realities of recovery of a COJ? There are many funders out there that believe the COJ is a magic wand. They 70 00:09:48.420 --> 00:09:57.900 sent one file it an hour later I get a phone call. Did you get my money? The answer is no. They don't operate like that. They are not that quick. And the recovery of 71 00:09:57.900 --> 00:10:06.990 COJ's has actually been decreasing. Over the last couple of years, there's a lot more competition in the space, a lot more COJ's are being filed. And there is 72 00:10:06.990 --> 00:10:18.360 an entire opposite end that's doing everything they can to make sure that you don't collect. There are many, many debt settlement companies out there that are using 73 00:10:18.390 --> 00:10:27.180 the COJs in your filings to poach merchants, and send them a very, very scary email. I don't know how many of you here have seen those emails from the debt 74 00:10:27.180 --> 00:10:37.500 settlement companies, telling merchants. Oh, a COJs has been filed, they're coming for you. The email that that Bloomberg made mentioned to in their articles is true, 75 00:10:37.800 --> 00:10:46.710 these debt settlement companies move a lot quicker than any cash advance company, you guys should maybe consider hiring them as ISOs. But they really, really 76 00:10:46.710 --> 00:10:55.650 poach these merchants, and tell them move your accounts, close your account, open a new entity, just take out your money in cash, give it to a friend give 77 00:10:55.650 --> 00:11:06.120 it to a sibling, they won't be able to get it. And then they use that to settle for pennies on the dollar. It's definitely and they're promoting challenges to these 78 00:11:06.120 --> 00:11:17.460 judgments in judgment enforcement. Recently, you know, we've used a confession of judgment to obtain diamonds, for one of our clients out of a safe deposit box, one 79 00:11:17.460 --> 00:11:28.050 of our happier moments. But that doesn't mean that was without any challenges. The COJ can be used for more than just trying to throw it at a bank and hope that 80 00:11:28.050 --> 00:11:36.780 they freeze the account and all your money sitting there. But the reality is, that's more likely to not happen. When a merchant's bouncing with an R01, odds 81 00:11:36.780 --> 00:11:44.640 are there's no money in the account, running to file a COJ, which may not even be a default, according to your contracts can cause you to spend money litigating that 82 00:11:44.640 --> 00:11:56.010 versus actually collecting your money. There are many, many cases where that's happened, you know, I get phone calls all the time that company X filed a COJ, I gotta 83 00:11:56.010 --> 00:12:04.050 file before before they get their judgment and get the money. Company X filing a judgment is not a default under the standard MCA agreement. That doesn't mean you 84 00:12:04.050 --> 00:12:14.190 can file just because somebody else does a bad thing doesn't mean that you should also. Again, they may get paid, but they also may get sued for it. And that's 85 00:12:14.190 --> 00:12:23.550 happening more and more often, as Chris will tell you, I'm sure he gets countless phone calls from funding companies that have improperly executed on a COJ. The 86 00:12:23.640 --> 00:12:31.020 COJ is a powerful weapon, but it has to be used in the right way. Right now our industry is getting attacked from all sides, we are no longer in the favorite 87 00:12:31.020 --> 00:12:38.190 industry. Judges don't love us, courts don't love us. Even the clerks don't love us. They're not interested in just stamping COJ's anymore. 88 00:12:38.190 --> 00:12:41.670 Christopher Murray: They don't like his clients, they like me. We are still on good terms. 89 00:12:43.160 --> 00:12:44.210 Steven Berkovitch: How's Erie County doing? 90 00:12:45.680 --> 00:12:46.640 Christopher Murray: They don't like anybody. 91 00:12:47.590 --> 00:12:54.910 Steven Berkovitch: But it's something that you really need to be paying attention to. And really make sure that there's actually defaults that are happening. 92 00:12:55.120 --> 00:13:00.520 Otherwise, all of these laws that the previous panel was talking about are going to come into play. And that's not going to be good for the industry as a 93 00:13:00.520 --> 00:13:09.460 whole. The industry as a whole has to really band together to do something in order to make sure that the COJ's don't go away. And if they put guardrails on it 94 00:13:09.460 --> 00:13:19.030 so be it. But that's not the worst thing. It could be a lot worse if not having them at all. I'm going to turn it over to the other side of the panel to discuss Sure. 95 00:13:19.280 --> 00:13:29.360 Lindsey Rohan: So I have the privilege of talking a little bit about federal legislation with respect to confessions of judgment. And I want to start by 96 00:13:29.360 --> 00:13:38.510 actually congratulating the industry, because for a really long time, I've been hearing how broken Washington is, and no one gets along, we can't get 97 00:13:38.510 --> 00:13:49.130 anything done. And really congratulations, you guys have accomplished the impossible. And you got a bipartisan effort together to ban confessions of 98 00:13:49.130 --> 00:14:02.450 judgment. Who knew? But it's possible. So and and I can't give you all the credit. It actually came out of the notorious Bloomberg series, I refer to it as a 99 00:14:02.450 --> 00:14:14.270 comic book. These articles really caught the attention of legislators and they had all the ingredients to do so. Right. They had bad actors. They had corruption by 100 00:14:14.270 --> 00:14:24.890 city marshals, and they had a court system that seemed to be sort of going along with things when you look at the rates of how many confessions of judgments have 101 00:14:24.890 --> 00:14:33.170 been filed. And although Chris is correct, I mean confessions of judgment have been around forever. But if you look at the rates of filings in the past couple 102 00:14:33.170 --> 00:14:42.440 of years, there's certainly a remarkable increase. So that's really all it took for Congress to say, hey, we get to come in and save the day. And what did they do? 103 00:14:42.440 --> 00:14:52.640 They came up with a bill. It's called the Small Business Lending Fairness Act. It essentially seeks to extend the ban on confession of judgments that already 104 00:14:52.640 --> 00:15:02.780 exist in the consumer context to the commercial context. The bill has been introduced. It's sitting in committee right now. It's about a paragraph long. It's 105 00:15:02.780 --> 00:15:16.880 not complicated at all, it says, No COJ's. And, you know, this is certainly potentially a problem. I know that a lot of entities feel as if without the 106 00:15:16.880 --> 00:15:27.500 confession of judgment, they really don't have much protection when offering capital to small businesses. And that's certainly a legitimate concern. And I would 107 00:15:27.500 --> 00:15:37.880 say to sort of echo Stephens comments, it's really important that you get involved because while this bill is sitting in committee, and the truth is the political 108 00:15:37.880 --> 00:15:49.010 climate right now is pretty much stagnant. No one's doing much of anything. Take advantage of that time, get involved, make sure that you are part of the cause. 109 00:15:49.010 --> 00:16:03.050 Because, what can happen is, instead of a complete ban, you can advocate for some responsible guardrails. And this would be a huge win for the industry. Because, the 110 00:16:03.050 --> 00:16:15.710 Bloomberg articles are a response to an effort to really get rid of alternative financing. And so you have to recognize that a battle has been laid, you need 111 00:16:15.710 --> 00:16:27.800 to participate and make sure that you use this time to advocate for some responsible guardrails with respect to the COJ ban at the federal level. There's one other 112 00:16:27.800 --> 00:16:39.890 thing that I think is sort of important and relevant to know about federal regulators, and how it would relate to confessions of judgment. So the FTC recently has 113 00:16:39.890 --> 00:16:49.730 expressed an interest in getting to know the alternative finance space better. And in fact, on Wednesday, Kate, you're going to be speaking at a 114 00:16:49.730 --> 00:17:06.020 hearing, where the FTC is seeking more information on fairness in small business lending, and they have already at their exposure, the FTC Section 5A which is 115 00:17:06.050 --> 00:17:17.090 UDAAP? You're all familiar with UDAAP, correct? Yes Unfair, Deceptive Acts and Practices are illegal. So he way in which this could relate to confessions of judgement, 116 00:17:17.090 --> 00:17:27.770 is FTC says we can't regulate all the sales agents, but we want to look at the funding entities, we want to look at the lenders. Now imagine, in the Bloomberg 117 00:17:27.770 --> 00:17:36.710 articles had the merchant said, you know, when they brought me this confession of judgment, they told me just sign it, nobody ever uses it, they're not gonna 118 00:17:36.710 --> 00:17:47.120 file this against you. Or they told me I need to hurry up and get this notarized. I don't have time to have my attorney review it. Those types of statements made 119 00:17:47.150 --> 00:17:56.180 by sales agents would be considered deceptive practices, because they have the ability to mislead, the don't even need to actually mislead, they just have 120 00:17:56.180 --> 00:18:08.210 the ability to mislead. If the sales agent makes those statements, the FTC is going to hold the funding entity or the lender liable for that UDAP violation, that 121 00:18:08.660 --> 00:18:18.110 actually pretty shocking. That's something that everyone should be very, very concerned about. Because it's already very difficult the relationship between sales 122 00:18:18.200 --> 00:18:27.650 agents and funding entities, but imagine the impact of that relationship, if funding entities are going to be held responsible for the representations that 123 00:18:27.650 --> 00:18:37.040 sales agents make, especially with respect to this confession of judgment, which seems to be sort of like, you know, this toxic instrument. So that's something I would 124 00:18:37.040 --> 00:18:47.720 also really consider, there's two takeaways here. One there's a lot you can be doing internally, to protect your businesses, set up good policies and procedures 125 00:18:47.720 --> 00:18:56.660 around the use of the confession of judgement. Currently, it's a legal instrument, understand what the parameters are, understand how you should 126 00:18:56.660 --> 00:19:06.380 be using it, and write it down, make a policy, you have no idea how effective it is to have a written policy that does insulate your business in many, many ways. 127 00:19:06.380 --> 00:19:15.890 The second thing is, understand and know who you re in business with, make sure that you're having conversations with your sales agents. Explain to them what's 128 00:19:15.890 --> 00:19:25.430 permissible, and what's not permissible when speaking on these instruments. That's really important. And the second thing and again, is to get involved. There's 129 00:19:25.460 --> 00:19:34.190 a lot of trade associations roaming around the hallways today. Talk to someone. Be part of the cause. Because I promise you there are a lot of people out 130 00:19:34.190 --> 00:19:43.430 there lobbying and advocating against this industry that provides a lot of really positive benefits for small businesses. So we can work together you could really 131 00:19:43.430 --> 00:19:51.260 make a lot of positive change. And so those are the things that are happening on the federal level. Kathy is going to talk about some of the state 132 00:19:51.260 --> 00:19:52.190 regulations 133 00:19:52.190 --> 00:20:02.140 Katherine Fisher: I am but before I get to the topic of state regulations, Lindsey had a really good point about the Federal Trade Commission holding funders 134 00:20:02.140 --> 00:20:11.740 responsible for the acts of brokers, but they also will hold brokers directly responsible for any unfair and deceptive practices. In fact, the Federal Trade 135 00:20:11.740 --> 00:20:21.970 Commission so far has only brought one action in this space, and it was against a broker for misrepresenting the cost of the product. In addition to issuing fines, 136 00:20:21.970 --> 00:20:34.090 the Federal Trade Commission has the authority to ban someone from a whole industry. So this is no joke. So be aware of being honest and giving correct 137 00:20:34.090 --> 00:20:43.420 representations to merchants that you're talking with. And one other one other thing before we get to the topic of state regulation, and that is the issue of 138 00:20:43.450 --> 00:20:52.390 affidavits being correct. Affidavits filed with the confession of judgment being correct. Because everyone's busy, and it seems like paperwork to get 139 00:20:52.390 --> 00:21:04.240 filed with the legal pleadings, but there's been a recent case where a judge was very angry, because the affidavit that was filed with the confession of 140 00:21:04.240 --> 00:21:07.120 judgment was incorrect. And I thought I'd asked you guys more about that. 141 00:21:07.210 --> 00:21:13.990 Christopher Murray: So it wasn't the affidavit of confession of judgment that was the problem in this case. It was the affidavit submitted by the funder in 142 00:21:13.990 --> 00:21:23.800 support of the entry of judgment. Apparently, the amount that the merchant paid was wrong, the amount that was outstanding was wrong. And whether or not a 143 00:21:23.800 --> 00:21:34.300 breach had occurred was wrong. That's not a good look. That's the kind of thing that results in a decision that says, well, not only is this void, but your lawyer 144 00:21:34.300 --> 00:21:44.800 is a criminal, and you're a criminal and everyone's a bad guy. And it's not usually a malicious thing that results in that it results in a casualness or a sense 145 00:21:44.800 --> 00:21:53.800 of, well, this is just routine, this is just something that we go ahead and do automatically. If you're signing an affidavit in support of the judgment, make 146 00:21:53.800 --> 00:22:01.060 sure the facts are right. If you're saying that a breach happened, make sure that a breach actually happened. If they're saying that a breach happened in a 147 00:22:01.060 --> 00:22:09.580 specific manner, make sure that's correct. It's not going to be good for you if you say that a breach occurred because the merchant deliberately blocked your 148 00:22:09.580 --> 00:22:18.670 access to a designated account. It's going to be terrible for you if what you really find out is after a year of litigation, oh, there was really just three, 149 00:22:19.240 --> 00:22:26.590 NSF's and we filed the confessional judgment because we saw somebody else had a breach and we really didn't want to get behind on our collections. That's the kind 150 00:22:26.590 --> 00:22:35.170 of thing that not only becomes a minor problem, it becomes a massive problem. That's going to make all of your judgments suspect going forward, you will start 151 00:22:35.170 --> 00:22:44.260 losing more cases just because you lost the one. And that's a really good point. It's something of a attention to detail, actually looking at things you 152 00:22:44.260 --> 00:22:52.690 cannot robo sign something, you cannot have a notary in your office, which is rubber stamping stuff. Therefore, I'm using the word rubber stamp deliberately. I know 153 00:22:52.690 --> 00:23:01.780 that invokes a Bloomberg article, don't rubber stamp stuff, don't do the bad things that people accuse you of doing. Because it's rarely malicious as usually 154 00:23:01.780 --> 00:23:10.450 laziness. And laziness is the major sin when it comes to legal work, when it comes to getting a judgment. So that's what I really want to call your attention to on 155 00:23:10.450 --> 00:23:10.870 that front. 156 00:23:10.960 --> 00:23:20.380 Steven Berkovitch: You should really specify what the default is. Don't just write a default occurred. Was it a blocked payment? Did he miss too many payments? But 157 00:23:20.380 --> 00:23:28.540 you also have to make sure that you do some sort of background check and say, hey, we believe you still was receiving revenue for X and he hasn't remitted them to 158 00:23:28.540 --> 00:23:34.360 us. The blank line that I've been seeing on a lot of affidavits, and a default occurred would not hold up. 159 00:23:35.320 --> 00:23:43.660 Christopher Murray: That's actually a good point. A fabulous case it's unreported really doesn't hold a lot of precedential value. It involved one of Ms. Rohan's 160 00:23:44.470 --> 00:23:51.310 affidavits of confession of judgment from one of our clients. It involved a case where they specifically spelled out that what the merchant did. What did the 161 00:23:51.310 --> 00:24:01.240 merchant do? Well, he diverted all of the revenue, all of the assets through a identically named company that's located at the same address. Well, that's really 162 00:24:01.240 --> 00:24:09.760 good. That's really detailed. That's the kind of thing that makes a court feel good if anyone comes around and tries to challenge that. That's detail its attention. 163 00:24:09.940 --> 00:24:18.820 It says this is not robo sign. This is something that was investigated. There are lessons to take from the consumer space, meaningful review is the kind of thing 164 00:24:18.820 --> 00:24:27.580 that we can take from the consumer space. Meaningful review went into her clients affidavit of confession of judgment, and that was the kind of thing that makes it 165 00:24:27.970 --> 00:24:35.410 truly unimpeachable. That really shows that if someone does want to come around with a challenge, not only will they probably lose, but the court is going to 166 00:24:35.410 --> 00:24:44.320 probably throw them out on their backside, in the end the most aggressive way, and then they look bad. And it's clear that they're the bad guy for doing a 167 00:24:44.320 --> 00:24:53.440 frivolous challenge to a judgment. Whereas a there's no allegation that the MCA company was wrong and I will allow Kate to go because I know she has a lot to talk about 168 00:24:53.440 --> 00:25:01.280 Katherine Fisher: I'm glad that you addressed that. Thank you. I'm going to talk about proposed legislation in New Jersey and New York that would affect 169 00:25:01.280 --> 00:25:10.100 confessions of judgment. There are three bills now that are pending in New York and New Jersey. Two of which would impose complete bans on confessions of judgment. 170 00:25:12.020 --> 00:25:19.190 More interesting, though, I think is a bill that's pending in New Jersey that rather than banning confessions of judgment would require a disclosure 171 00:25:19.190 --> 00:25:31.700 slash warning to the merchant. And the warning spells out that if the COJ is filed, the merchant is waiving the right for notice before the judgment is filed. That 172 00:25:31.700 --> 00:25:42.440 the merchants waiving the right to appeal or appear in court and argue his own case. And the result is that the merchants property may be seized and his bank 173 00:25:42.440 --> 00:25:55.280 accounts frozen. This disclosure bill is very good because in order for a confession of judgment today to be enforceable without any of this legislation, even 174 00:25:55.280 --> 00:26:03.050 passing under the Constitution, it has to be a knowing I have to look at my notes. 175 00:26:03.050 --> 00:26:04.790 Christopher Murray: Knowing and voluntary 176 00:26:04.840 --> 00:26:13.360 Katherine Fisher: Thank you, knowing voluntary and intelligent waiver. So a confession of judgment is a waiver of a right to due process. All of us have the 177 00:26:13.360 --> 00:26:23.320 right to due process, under the Constitution, and in this context has the right to appear in court and argue our side of the story. In order for a confessional 178 00:26:23.320 --> 00:26:33.970 judgment, which is a waiver of the right to due process to be valid, it has to be a knowing voluntary and intelligent waiver. So this disclosure warning is 179 00:26:33.970 --> 00:26:47.470 proposed in New Jersey, clicks off the knowing and intelligent boxes. So voluntary means the merchant intends to sign the document. Knowing means they 180 00:26:47.470 --> 00:26:55.690 understand what they're doing, and intelligent means they understand the consequences. And that's really the key that the merchant understands that there are 181 00:26:55.690 --> 00:27:06.910 significant legal consequences to signing a confession of judgment. I hope to see more legislation like this New Jersey warning disclosure bill, because that really 182 00:27:06.910 --> 00:27:16.000 supports current law, and provides a merchant an opportunity to really consider whether they want to sign a contract with the confession of judgment. And I 183 00:27:16.000 --> 00:27:28.510 also echo, Lindsey's comment on getting involved. There are trade associations out there, they're tirelessly working on bills like this, to protect the industry, 184 00:27:28.720 --> 00:27:41.260 and to help merchant cash advance companies and brokers move forward in a successful path. And if you're not participating in that, then you know, you might get hit 185 00:27:41.260 --> 00:27:49.570 with unexpected legislation that is going to harm the industry. So please get involved. We have a couple of minutes left, if anyone has questions. 186 00:27:53.350 --> 00:28:02.950 Christopher Murray: Anyone? I can't actually see anyone with the lights so you guys will have to tell me. 187 00:28:02.950 --> 00:28:10.800 Lindsey Rohan: You know what, Chris, one of the things that you'd mentioned earlier that I think is probably worth considering, is updating your confession of judgements 188 00:28:10.800 --> 00:28:23.130 judgment. So if you have a chance to catch Chris or Stephen walking about, there's very simple ways you can update the affidavit that you're utilizing in New York 189 00:28:23.130 --> 00:28:33.630 right now, that would make it compliant. I mean, really simple, easy fixes. So that's something I think that's worth looking into. And one question I wanted to ask 190 00:28:33.630 --> 00:28:44.670 you, Kate, is that, you know, I know that you've been very involved in advocating when it comes to these regulations, both in New Jersey and New York. Are you finding 191 00:28:44.670 --> 00:28:53.700 that at the state level, a lot of the proposed legislation with respect to confession of judgment is somewhat conflicting with each other, which could 192 00:28:53.700 --> 00:28:59.400 create a problem in just doing business? Because you have different states with different requirements? 193 00:28:59.400 --> 00:29:08.420 Katherine Fisher: That's a good question. If the complete banned bills passed and there won't be a conflict because of that, they'll just be gone. But 194 00:29:08.420 --> 00:29:19.130 having we may be facing a situation where there will be state by state distinctive warnings or disclosures that need to be given with a confession of judgment. Which 195 00:29:19.130 --> 00:29:28.490 will complicate the ability to do business in any state with a different law. That's already happening though with different disclosure requirements. For example, in 196 00:29:28.490 --> 00:29:37.910 California sometime in 2020, there will be a specific disclosures required for MCA. So everyone's going to need a California specific MCA contract. I think that's 197 00:29:37.910 --> 00:29:40.040 the future of the industry where we're going. 198 00:29:40.310 --> 00:29:43.880 Lindsey Rohan: Excellent. I think I saw a hand in the back there. 199 00:29:45.640 --> 00:29:46.930 Yes? No? No? 200 00:29:47.080 --> 00:29:56.230 Attendee: Yes. If you go through the looking glass and COJ's are banned or strictly limited. What's on the other side? What are the alternatives? How does the 201 00:29:56.230 --> 00:29:58.300 industry protect itself? What else can it do? 202 00:29:58.510 --> 00:30:06.460 Christopher Murray: So I think that's a great question and I say we look to our past. What did people do before the confession of judgment became really 203 00:30:06.460 --> 00:30:17.920 commonplace after 2012? Well, before that, we saw a lot more use of Uniform Commercial Code remedies. Which would be the UCC 9-406 demand that's very common 204 00:30:17.920 --> 00:30:27.610 amongst MCA companies, which freezes processing or lawsuits or arbitrations, any of those things are going to be valid options. I know that they don't sound as 205 00:30:27.610 --> 00:30:35.080 attractive or even as cheap as the confession of judgment. But the truth of the matter is, if you don't have the confession of judgment, you really only have a 206 00:30:35.080 --> 00:30:45.460 limited spectrum of options. That is your spectrum of options. It's still a good spectrum. UCC 9 406 demand is oftentimes far more effective than the confession of 207 00:30:45.460 --> 00:30:54.040 judgment anyway. It's still commonly used by collections attorneys. It's still frankly, in my book, the gold standard of collections remedies. 208 00:30:54.730 --> 00:31:02.650 Steven Berkovitch: I'm a big fan of it as well. Lawsuits has its own advantages over COJ's. There is something to be said when somebody gets sued and serves 209 00:31:02.650 --> 00:31:11.080 and they're not sure what can happen. That incentivizes them to give you a call and work something out. With a COJ you're already at the end, you got your judgment, 210 00:31:11.080 --> 00:31:16.450 you've tried to freeze the bank, there's nothing in there. They just look at it as it's over. What's the point of working something out when they've already got 211 00:31:16.450 --> 00:31:16.960 a judgment? 212 00:31:16.960 --> 00:31:20.290 Christopher Murray: That's an excellent point. 213 00:31:21.130 --> 00:31:23.560 Katherine Fisher: I think we're out of time, though. Thank you all very much. 214 00:31:23.560 --> 00:31:23.890 Everyone: Thank you.