Lending Express Clamps Down on COJ’s With a New, No-nonsense Attitude to the Corrupted PracticeLending Express Clamps Down on COJ’s With a New, No-nonsense Attitude to the Corrupted Practice
Become customers can now rest assured that they’ll never have to sign a Confession of Judgment (COJ) to get funds for their business. Putting its best foot forward and setting the bar for others to follow, Become has taken the righteous decision to disassociate itself from the crafty malpractice.
Become’s partners have been instructed to steer clear of the practice of using COJs (be it directly or indirectly) with its customers or to face cutting ties.
What is a Confession of Judgment and why are they so damaging?
A confession of judgment is a way for lenders to bypass the usual court proceedings that follow when settling a dispute, greatly minimizing a prolonged legal undertaking. When a business owner signs a COJ they are essentially signing away their rights to have a voice with a claim if it should come to that. COJs have been a focal point of great controversy as they don’t allow for the defendant – the borrower, the opportunity to present a viable defense, in fact, favor is automatically passed to the creditor.
COJs are commonly found in conjunction with merchant cash advances (MCAs) though that’s not to say that all MCAs require a COJ. This is especially true in states where COJs are illegal, such as Alaska.
If a merchant were to default after signing a COJ, the collection process would be significantly expedited. Rather than the creditor having to go through the process of suing the merchant, the creditor could immediately file a confession of judgment allowing for the debt collection process to begin. This would lead to the freezing of bank accounts, merchant processing accounts, PayPal accounts and some may go as far as directly contacting the business owners’ clients for payment. To make matters worse, the vast majority of default damages would increase the overall debt owed by a whopping 20%-25%. The unfortunate increase comes from the fact that borrowers would have agreed to pay all of the court costs, interest and even the lender’s attorney fees to collect the judgment – something they may not have fully comprehended when signing.
How is Become protecting its customers from COJs?
Become has reached an official agreement with all of its lending partners to amend its contracts and make certain that none of its customers will be exposed to signing a COJ when applying for a business loan. Moreover, the company will be sending this information to all of its customers to warn and educate them on the dangers of signing a COJ.
It’s important to understand that signing a COJ in order to get an MCA is often a last resort for high-risk business owners desperately trying to get funding for their business. Despite the fact that Become won’t be able to immediately help those high-risk customers, it feels that this is the right thing to do and hopes that other lenders will follow suit in distancing themselves from the dangerous practice.
Become to help high-risk customers without COJs
This is not to say that Become will abandon high-risk business owners, on the contrary, the technology company feels that a high-risk business owner is far better off in lowering their risk and becoming a healthier business before seeking funds. Using its proprietary technology, each and every business that applies with Become will receive a “LendingScore™”, that is, a tailored financial profile that nurtures businesses through the funding cycle and better yet, helps to increase their funding chances.
The process may be slower, but it is far more honorable. Nurturing the business will truly benefit it in the long-run as opposed to making an immediate profit and simply sending the business down a potentially rocky road.
Become believes that every business has the potential to succeed without signing a COJ and will be there for its customers to help them reach their funding goal in a safe and secure manner.
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