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A Brooklyn-based small-business funder is drawing scrutiny after filing hundreds of debt-collection cases in Iowa’s Polk County despite having little apparent connection to the state, according to a new investigation by The Des Moines Register. The filings rely on Iowa’s still-available confession-of-judgment procedure—a fast-track mechanism that can allow a creditor to obtain a judgment without a conventional lawsuit, hearing or advance notice to the debtor.
Fenix Capital Funding LLC, which markets funding to small businesses nationwide, has reportedly brought the cases in Polk County against merchants located outside Iowa. The company’s approach puts renewed attention on an increasingly controversial collections tool and on the jurisdictional, due-process and compliance issues that arise when commercial funders select favorable forums for post-default enforcement.
Iowa’s confession-of-judgment route
A confession of judgment generally involves a borrower’s pre-signed acknowledgement authorizing judgment if the creditor later declares a default. Once filed and accepted, the judgment can give the creditor access to ordinary enforcement remedies, including bank levies, property seizure and wage garnishment where permitted.
Iowa law permits a judgment by confession to be entered without an action, but its statute requires a written statement that is made, signed and verified by the defendant. The statement must concisely describe the facts giving rise to the indebtedness and affirm that the stated sum is “justly due.” Iowa Code §676.3 is therefore not simply a vehicle for filing a generic contractual provision signed when funding closes; it contemplates a verified, debtor-executed statement tied to an actual and quantified obligation…