Prohibits the inclusion of a confession of judgment in a contract or agreement for a financial product or service.
Summary
A04327 would add a new section to New York’s General Business Law prohibiting any person from requiring a confession of judgment in a contract or agreement for a financial product or service. A confession of judgment is a contractual term that allows one party to obtain a judgment against another without the usual litigation process, and the bill would bar its use when tied to covered financial products or services.
The bill defines “financial product or service” broadly to include products or services offered by entities regulated by the Department of Financial Services under the Banking Law or Insurance Law, as well as certain consumer-facing financial products and services, while carving out categories already under exclusive federal jurisdiction or otherwise regulated by other state agencies. It also excludes products or services where state regulation would be preempted by federal law. The measure would take effect 90 days after becoming law.
Impact
If enacted, the bill would amend the General Business Law by creating a new consumer-protection rule limiting contract terms in the financial sector. It would prohibit lenders, insurers, and other covered financial providers from requiring confessions of judgment in agreements with consumers and other covered parties, reducing the ability to obtain expedited judgments outside normal court procedures. The law would affect contracts involving regulated financial products and services, while leaving federally preempted or separately regulated products outside its scope.
Sentiment
The available committee votes suggest generally favorable sentiment toward the bill. It passed the Assembly Banks Committee 21-8 and the Assembly Codes Committee 16-6, indicating majority support but not unanimity. No committee transcripts were provided, so the record shows support for the consumer-protection approach but also a meaningful minority of opposition.
Contention
The main point of contention is likely the bill’s restriction on a contractual remedy that can be valuable to financial providers seeking quick enforcement of obligations. Supporters appear to favor limiting confessions of judgment as an unfair or coercive practice in consumer and financial contracts, while opponents likely object to reducing creditor remedies and to the breadth of the definition of covered financial products and services. The carveouts for federal preemption and other state-regulated products also suggest concern about jurisdictional overlap and regulatory scope.