Confession of Judgement

by Bryan J. Dardis, Esq

New legislation was introduced in Ohio on July 22, 2015 which, if passed, will affect creditors and lenders alike.

Ohio is one of the few remaining states that permit a lender or creditor to enter a judgment against a debtor in default without prior notice. This is made possible through a provision in a promissory note and commonly referred to as a “cognovit judgment” or “confession of judgment.” When a debtor borrows money, signs a note with a cognovit provision and fails to pay the money owed, the debtor waives his/her right to trial and defend against the creditor or lender going to court and entering a judgment without prior notice. Cognovit judgments are invalid as to consumer debts.

The statute has remained unchanged for forty (40) years; however, if the new legislation (HB 291) passes, three major changes will occur:

  1. The proposed legislation clarifies that cognovit judgments can be entered only when the default is for nonpayment;
  1. Lenders and creditors would no longer have the ability to enter a cognovit judgment without first providing a thirty (30) day notice to the debtor. The bill (which revises Ohio Revised Code 2323.13) would require a creditor to send a written notice to the debtor at least thirty (30) days prior to the entry of judgment. Through this notice, the debtor is provided with an opportunity to request a hearing before the judge to determine the whether he/she has defaulted on the loan. Both the creditor and debtor would have the ability to call witnesses and offer evidence.
  1. The warning language, as part of the cognovit provision, would now also include specific language detailing the thirty (30) day notice requirement and opportunity for a hearing.

We will continue to follow this legislation and provide updates as necessary.