The Vermont legislature has passed a coerced debt bill that will create new protections for consumers who claim debts were incurred through domestic abuse, economic abuse, human trafficking, intimidation, fraud, or unauthorized use of their personal information. The legislation, H.385, passed the Senate and now heads toward the governor’s desk.
The bill establishes a formal framework allowing consumers to dispute what the legislation defines as “coerced debt,” including debt incurred through threats, force, deception, or economic control by another individual. The measure applies to all or part of a debt and would allow consumers to provide documentation such as police reports, FTC identity theft reports, court orders, or certifications from attorneys, healthcare providers, law enforcement personnel, or domestic violence support professionals.
Under the legislation, once a creditor receives both a statement of coerced debt and supporting documentation, the creditor would have 10 business days to stop collection activity against the debtor, halt garnishments, refrain from filing or continuing lawsuits tied to the debt, and request deletion of related negative information from consumer reporting agencies. The bill also would prohibit creditors from selling or transferring the disputed debt while the coerced debt claim is active.
The legislation also creates specific communication requirements. Written notices related to coerced debt claims would need to be provided in both English and Spanish, with additional language accommodations required in some circumstances. The Commissioner of Financial Regulation would be responsible for publishing a standardized model form consumers can use when asserting coerced debt claims.
The bill further amends Vermont’s credit reporting laws by requiring consumer reporting agencies to reinvestigate debts identified as potentially coerced debt. If the debt is determined to qualify, the reporting agency would be required to remove references to the debt from the consumer’s credit report.
H.385 also creates civil liability provisions for violations of the law. Consumers could recover actual damages, statutory damages of up to $5,000 per violation, attorney’s fees, and punitive damages for willful noncompliance. The bill additionally states that creditors retain the right to pursue collection efforts against the individual alleged to have caused the coerced debt.
If enacted, the legislation would take effect July 1, while Vermont’s Attorney General would be required to update the state’s debt collection regulations by January 1, 2027 to align with the new requirements.
