A bill has been introduced in the New Mexico legislature that establishes rules for how creditors — which includes debt buyers and debt collectors — must handle coerced debt situations.
If enacted, House Bill 313 would create the Civil Relief from Coerced Debt Act and put a formal framework around how consumers can assert that a debt was incurred through coercion, abuse, trafficking, fraud, or the non consensual use of their personal information, and what creditors must do once such a claim is made.
What the bill would do
The proposal defines “coerced debt” broadly, covering debts incurred through identity theft, fraud, duress, intimidation, threats, force, coercion, manipulation, undue influence, or misinformation, when connected to human trafficking, domestic violence, sexual assault, stalking, or abuse of vulnerable adults. Debt secured by real property would be excluded.
Under the bill, consumers could submit a formal statement of coerced debt, supported by documentation such as a police report, court order, verification from a qualified third party, or other evidence like messages or records. Once that statement is received with adequate documentation, creditors would be required to act quickly.
Key operational impacts for creditors and collectors
If a valid statement is provided, the bill would require creditors to, within 10 business days:
- Suspend all collection activity against the consumer
- Halt or dismiss lawsuits related to the alleged coerced debt
- Stop garnishments and return any payments already collected
- Notify credit reporting agencies and request deletion of reported information
- Refrain from selling or transferring the debt
Creditors would also be required to include information in collection letters and on their websites explaining how consumers can submit a coerced debt statement, and to provide notices in both English and Spanish.
Why this matters for the industry
Beyond operational changes, the bill creates potential liability for noncompliance, including actual damages, statutory damages up to $5,000 per violation, attorneys’ fees, and even punitive damages for willful violations. It also shifts the burden to creditors to disprove a coerced debt claim if they challenge it in court.
