Title: To prohibit confessions of judgment in connection with the extension of covered credit or creation of covered debt, and for other purposes.
Policy area: Finance and Financial Sector

Summary:
This bill prohibits a confession of judgment or similar agreement as a condition to a loan or extension of credit of $2 million or less during the COVID-19 (i.e., coronavirus disease 2019) emergency period and for 120 days following. (A confession of judgment is an agreement to a judgment of liability without notice and opportunity to be heard in court in the event of the default of a borrower.)

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6795 Introduced in House (IH)]

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116th CONGRESS
  2d Session
                                H. R. 6795

To prohibit confessions of judgment in connection with the extension of 
  covered credit or creation of covered debt, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 8, 2020

  Ms. Velazquez (for herself and Ms. Waters) introduced the following 
    bill; which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To prohibit confessions of judgment in connection with the extension of 
  covered credit or creation of covered debt, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CONFESSIONS OF JUDGMENT PROHIBITION.

    (a) In General.--During the covered period, in connection with an 
extension of covered credit or the creation of a covered debt in or 
affecting commerce (including any advance of funds or sale or 
assignment of future income or receivables that may or may not be 
credit), no person may directly or indirectly take or receive from 
another person, or seek to enforce, an obligation that constitutes or 
contains a cognovit or confession of judgment (for purposes other than 
executory process in the State of Louisiana), warrant of attorney, or 
other waiver of the right to notice and the opportunity to be heard in 
the event of suit or process thereon.
    (b) Enforcement.--Any person who fails to comply with the 
requirements of this section with respect to any obligation owed by a 
covered borrower shall--
            (1) be held liable under section 813 of the Fair Debt 
        Collection Practices Act (15 U.S.C. 1692k) where--
                    (A) the covered borrower is deemed to be a 
                ``consumer'', as defined in section 803 of such Act; 
                and
                    (B) the person is deemed to be a ``debt 
                collector'', as defined in such section; and
            (2) be liable to the covered borrower in an amount equal to 
        10 times the maximum amount of damages allowed under section 
        813 of such Act for each violation of the requirements of this 
        section.
    (c) Consideration.--At the end of the covered period, a person to 
whom an obligation described in subsection (a) is owed shall take into 
consideration the financial situation of the covered borrower that owes 
such obligation for the repayment of such obligation.
    (d) Definitions.--In this section:
            (1) Commerce.--The term ``commerce'' has the meaning given 
        in section 4 of the Federal Trade Commission Act (15 U.S.C. 
        44).
            (2) Covered borrower.--The term ``covered borrower'' means 
        a person that--
                    (A) receives credit or an advance of funds; or
                    (B) makes an assignment of future income or 
                receivables.
            (3) Covered credit.--The term ``covered credit'' means 
        credit provided to a covered borrower in an amount that is less 
        than or equal to $2,000,000.
            (4) Covered debt.--The term ``covered debt'' means any 
        obligation of a covered borrower to pay to another person an 
        amount that is less than or equal to $2,000,000--
                    (A) regardless of whether such obligation is 
                absolute or contingent if the understanding between the 
                parties is that any part of such amount shall be or may 
                be returned;
                    (B) that includes the right of the person providing 
                the money to an equitable remedy for breach of 
                performance if the breach gives rise to a right to 
                payment; and
                    (C) regardless of whether the obligation or right 
                to an equitable remedy described in subparagraph (B) 
                has been reduced to judgment, fixed, contingent, 
                matured, unmatured, disputed, undisputed, secured, or 
                unsecured.
            (5) Covered period.--The term ``covered period'' means the 
        period beginning on the date of the enactment of this section 
        and ending 120 days after the end of the incident period for 
        the emergency declared on March 13, 2020, by the President 
        under Section 501 of the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act (42 U.S.C. 4121 et seq.) relating to 
        the Coronavirus Disease 2019 (COVID-19) pandemic.
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