Vermont moves to protect survivors from coerced debt
Vermont becomes the ninth state to enact specific protections against coerced debt, a growing form of economic abuse
Survivors of domestic violence, human trafficking, elder abuse and other forms of exploitation in Vermont will gain new protections from debts fraudulently incurred in their names under legislation recently signed by Vermont Gov. Phil Scott.
Consumer advocates say coerced debt is one of the least visible but most damaging forms of financial abuse, trapping victims in years of collection actions, damaged credit scores and barriers to housing and employment.
The new Vermont law prohibits creditors and debt collectors from holding consumers responsible for debts incurred through fraud, duress, intimidation, force, coercion or identity theft.
The legislation is intended to help survivors of domestic violence, human trafficking, elder abuse, exploitation of people with disabilities and other vulnerable populations whose identities or financial accounts have been misused by abusers.
“We are pleased to see Governor Scott and the Vermont Legislature take action to help people who have been forced to take on debt because of abuse,” said Carla Sanchez-Adams, senior attorney at the National Consumer Law Center (NCLC). “This law provides relief for people with wrongfully damaged credit histories and ends the aggressive debt collection tactics that add to the suffering caused by coerced debt.”
How the law works
Under the new law, consumers who believe a debt was coerced can submit supporting documentation to creditors or debt collectors.
Once that documentation is received, collection activity must stop while the creditor conducts a reasonable investigation.
If the investigation determines that the debt was coerced, any collection lawsuit or arbitration proceeding must be dismissed. Existing judgments must be vacated, and creditors must ask credit reporting agencies to remove information related to the coerced debt from the consumer’s credit file.
Advocates say those credit-reporting provisions may be among the law’s most significant protections because damaged credit histories can linger for years after abuse ends.
A widespread but underreported problem
Economic abuse occurs in an estimated 94% to 99% of domestic violence cases, according to research cited by victim advocates. Coerced debt is a common tactic, often involving credit cards, personal loans, utility accounts, medical debt, auto loans and buy-now-pay-later accounts opened or used without meaningful consent.
Abusers may pressure victims into signing loan documents, open accounts using stolen personal information, or force them to take on debt for household expenses while withholding resources needed to repay it.
The resulting financial damage can make it difficult for survivors to leave abusive situations or establish independent lives afterward.
Consumer advocates say victims frequently discover the debts only after collection notices arrive, wages are threatened with garnishment, or they are denied housing, employment or credit.
Growing national movement
Vermont joins eight other states that have enacted laws specifically addressing coerced debt: California, Connecticut, Illinois, Maine, Minnesota, Nevada, New York and Texas.
Many of the measures are based on the National Consumer Law Center’s Model State Coerced Debt Law, which provides states with legislative language designed to help victims challenge fraudulent debts and repair their credit histories.
“Without state action, coerced debt victims will continue to face the negative economic impacts of the abuse, including damaged credit histories that can deprive a survivor of access to much-needed housing, employment, and utility resources,” said Andrea Bopp Stark, senior attorney at NCLC.
Consumer takeaway
Consumers who believe debts were opened or incurred through coercion, identity theft or abuse should keep copies of police reports, court orders, protection orders, identity theft reports and other documentation that may support a coerced-debt claim.
Advocates say victims should also review their credit reports regularly for unfamiliar accounts and seek assistance from legal aid organizations, domestic violence programs or consumer protection attorneys if they discover suspicious debts.
As more states adopt coerced-debt protections, supporters hope survivors will no longer be forced to spend years paying for financial obligations created by their abusers.