Ohio is one of only a few states to still permit confessions of judgment, and new legislation (H.B. 67) was introduced on February 15, 2017 that, if passed, would have a drastic effect on the ongoing use of confessions of judgment in Ohio.
A confession of judgment, also commonly referred to as a cognovit provision, is a provision in a commercial promissory note or other instrument which allows a creditor to enter a judgment against a debtor in default without prior notice and the opportunity to present a defense. Though not permitted in consumer transactions, confessions of judgment are routinely used in commercial loan documents in Ohio. Although the statute governing confessions of judgment in Ohio has remained unchanged for decades, H.B. 67 is the second attempt in as many years to amend it.
Under the new legislation as proposed, a confession of judgment will only be permitted in connection with the settlement of a dispute. Any person who knowingly causes another person who is indebted, or against whom a cause of action exists, to confess judgment in regard to that debt or cause of action will be guilty of a first degree misdemeanor. Agents acting under a power of attorney will be similarly restricted to filing confessions of judgment within the state of Ohio that are connected with the settlement of a dispute. The proposed statutory revision would drastically change commercial loan documentation and enforcement in Ohio.
We will continue to follow this legislation and provide updates as necessary.