While there may be no cause for a lawsuit here and as far as you know, no harm to the child that can be documented, there may be at least a moral duty to report the "confession" to CPS. Perhaps this person is in some sort of recovery process whereby they confess and seek forgiveness, perhaps they have some other psychological need for attention or both. For mandated reporters, which you are not, a report to CPS is made when there is reason, as there is in this case or when there is the possibility that the person while no longer a threat to that child may have access to another. So while there may be no case civil or criminal against this person, CPS upon investigation might take some action against that person to protect other children in the future, such as barring them from employment providing care for children. Also, the report provides documentation for future reference.
Also, I hope this confession was not done in front of or discussed with the child, as that may create a new memory where one did not exist. In which case, if the confessor, made their cofrssion in front of the child and later the child begins having nightmares, there could be cause of action, but if the parents bring it up and the child begins having nightmares or behavioral problems there would be no cause of aciton. Also please don't look to blame every future instance of behavioral problems on this confession. There are some personality and mental disorders which compel the person to confess and which may signal other complex problems so it would be a good idea that the confession at least be reported.
