On Jan. 1, Erie County Clerk Michael Kearns implemented a policy rejecting court filings for confessions of judgment that do not comply with New York state law.
“Erie County has become a sanctuary county for these predatory out-of-state creditors and transactions,” Kearns said. “I refuse to let county resources be used as an implement of destruction upon small businesses and families.”
Kearns’ press release stated, “Confessions of judgment are oppressive legal instruments which grant a creditor the absolute right to enter a judgment against a debtor without notice or validity of the debt being reviewed by a judge. Small businesses will sell future accounts receivable in exchange for funding, securing that transaction with a confession of judgment against the business and the individual. When the creditor, in its sole opinion, determines a default took place, they then will file judgment and seize bank accounts or garnish wages.”
“These transactions have the practical effect of usurious loans,” Kearns said. “But, these companies have exploited a legal loophole preventing them from legally being considered loans.”
Due to the constraints of existing law, these rejections have been limited to out-of-state transactions with no ties to Erie County, which arbitrarily authorize numerous counties throughout the state of New York as the proper venue to enter judgments. Clerks in Orange and Richmond counties have followed Kearns’ lead and are now rejecting confessions ,as well.
“When one of my staff informed a law firm over the phone of the policy, the individual on the other end of the phone said, ‘It was fun while it lasted.’ Can you imagine someone saying that it’s ‘fun’ to engage in a practice that can ruin businesses and families?” Kearns said.
Last week, the clerk referred two filings to the Erie County district attorney’s office for suspected fraud.
“It appeared on the face these filings that a creditor’s attorney provided a phony local address to circumvent the policy,” Kearns said. “Small businesses need someone to stand up to this ‘win-at-all-costs’ mentality.”
The clerk has also been conferring with the Western New York Law Center regarding the abuses of creditors using confessions of judgment.
“The Western New York Law Center supports the Erie County clerk’s decision not to accept confessions of judgment with defendant from outside of Erie County due to the intimidation tactics frequently involved in obtaining them,” said Joe Keleman, executive director of the Western New York Law Center. “Confessions of judgment are often coerced out of desperate and financially challenged borrowers and filed in distant forums to prevent being challenged. We applaud the steps that the Erie County clerk is taking to prohibit these out-of-area confessions of judgment. We would encourage other county clerks across the state to take similar actions to protect unsuspecting borrowers from potential harm.”
The press release stated, “While the clerk recognizes his ability to guard against the filing of fraudulent and oppressive confessions of judgment is limited by law, he calls on legislators and the governor to take a stand and introduce legislation which eliminates the practice once and for all.”