A confession of judgment is a legal device - usually a clause within a contract - in which a debtor agrees to allow a creditor, upon the nonoccurrence of a payment, to obtain a judgment against the debtor, often without advanced notice or a hearing. These clauses may also require the debtor to waive their right to assert any defense against the entry of judgment or be represented by an attorney appointed by the creditor.
Confessions of judgment tend to be controversial and are frequently challenged on the grounds that they facilitate predatory lending practices or violate due process rights. The question of their constitutionality reached the Supreme Court in D.H. Overmyer v. Frick (1972), where the Court held that a cognovit- a type of confession of judgment- does not, per se, violate the Due Process Clause of the Fourteenth Amendment. In that case, the Court found that the debtor executed the note containing the confession of judgment clause voluntarily, knowingly, and intelligently, and for valuable consideration. However, in dicta, Justice Blackmun noted that the use of such clauses in adhesion contracts, where there is significantly unequal bargaining power between parties, may still be unconstitutional.
Some states, such as Indiana, prohibit the use of confession of judgment clauses in contracts. In 2020, the Maryland Court of Appeals held that state law prohibits the use of confession of judgment clauses in consumer transactions. In 2019, New York amended its laws to limit the use of confessions of judgment against out-of-state debtors.
[Last updated in June of 2021 by the Wex Definitions Team]