The New York legislature has passed a law and sent it to Gov. Kathy Hochul that prohibits creditors from enforcing coerced consumer debts while also creating a private right of action.
The bill, S.1353-B, represents one of the most expansive state-level efforts in the country to recognize and protect victims of economic abuse. If signed by the governor, the new law would fundamentally change how creditors, debt buyers, and collection agencies verify and pursue debts when a consumer claims the obligation arose from coercion, fraud, intimidation, or other abusive conduct.
What the bill does: The legislation creates an entirely new article within New York’s General Business Law dedicated to “actions involving coerced debts.” It defines coerced debt broadly, including obligations incurred through threats, force, fraud, manipulation, or the non-consensual use of personal information. Relationships covered include intimate partners, family members, caregivers, and traffickers, groups where economic abuse commonly occurs.
Creditors, defined to include debt collectors and debt buyers, would be required to pause collection activity upon receiving a sworn consumer statement and “adequate documentation of coerced debt,” which could be a police report, FTC identity theft report, court order, or notarized statement from a qualified third party such as a social worker, doctor, attorney, or clergy member.
During the review process, creditors must follow strict rules:
- They cannot contact the alleged abuser.
- They must use only the contact information the debtor provides.
- They must not disclose the debtor’s documentation to any third party.
- They must notify credit reporting agencies that the account is disputed.
If the debt is found to be coerced, the creditor must cease all collection activity and instruct credit bureaus to delete adverse information.
New rights and new risks: The bill creates a private right of action allowing consumers to sue creditors that violate these requirements. Consumers may recover statutory damages of $1,000, actual damages, and attorney’s fees. It also establishes an affirmative defense that can be raised in any collection lawsuit, even if the consumer did not previously submit a coerced-debt notice.
In addition, the individual who caused the coerced debt can be held civilly liable to the creditor or the consumer for the amount of the coerced debt, along with attorney’s fees.
