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The New York state legislature will decide whether to crack down on predatory lenders through a bill that would prevent lenders’ use of confessions of judgment against out-of-state debtors. According to The Washington Post, these lenders offer merchant cash advances to small businesses nationwide but have obtained more than 5,500 New York court judgments against borrowers in the first five months of 2019 alone.

Cash-advance lenders offer small businesses short-term loans that can cost 400% or more in interest, and some require signing a confession of judgment in order to get the money. However, these confessions of judgment mean that the borrowers waive their legal rights and agree in advance to lose any potential legal dispute. If a lender declares a default, the lack of notice or hearing allows the lender to begin seizing the borrower’s bank accounts or other assets.

In the wake of several articles published by Bloomberg News detailing these abuses, the New York attorney general’s office opened a probe and three county clerks stopped processing most judgments by confession. However, cash-advance lawyers kept sending more cases to counties that still accept confessions of judgment such as Kings County, also known as Brooklyn.

The bill under consideration by the New York state legislature would preserve state laws permitting confessions of judgment against New York residents, but prohibit them against people or businesses outside the state. The bill has cleared committees on mostly party-line votes, with all of the panels’ Republicans opposing the bill. The bill could come to a vote before the end of the legislative session on June 19.

Read more here.