What is a confession of judgment provision?
A confession of judgment is a contract clause in which the debtor consents in advance to allow the creditor to obtain a judgment against the debtor without giving the debtor prior notice or an opportunity to be heard in court. Such provisions are sometimes referred to as “cognovit” provisions. The Board’s rule prohibits confessions of judgment that involve anticipatory waivers of procedural due process in the context of consumer credit obligations. It does not prohibit a debtor from acknowledging liability, or from otherwise entering into a negotiated settlement, after a legal action has been instituted. The confession of judgment provision also does not affect a power of attorney in a mortgage loan obligation or deed of trust for purposes of foreclosure; nor does the provision affect a power of attorney given to expedite the transfer of pledged securities or the disposal of repossessed collateral, or to allow the prompt cancellation of insurance in an insurance premium finance contrac
