Vermont committee reviews H.385 to shield victims of coerced debt with new confidentiality and review process

The House Commerce & Economic Development committee on Thursday reviewed H.385, a bill establishing civil remedies and procedural protections for victims of coerced debt. Legislative counsel and multiple witnesses described changes to evidence standards, creditor duties, and confidentiality safeguards included in a revised strike-all draft.

Maria Royal, legislative counsel, walked the committee through the updated draft, saying the bill now requires a debtor to submit a sworn statement and at least one form of "adequate documentation" (for example, a law-enforcement report or a court order) to support a coerced-debt claim. Royal said the draft removes a Federal Trade Commission identity-theft report from the list of presumptively adequate documents because such reports are easily obtained and not independently verified.

Royal said the bill imposes immediate procedural protections for debtors: within 10 business days of receiving a debtor's statement and adequate documentation, the creditor must cease collection activity and refrain from selling or assigning the debt. The creditor must complete its review within 30 days and provide written notice to the debtor of its determination and the creditor's good-faith basis for that decision. If a creditor accepts the debtor's claim, the creditor must contact consumer reporting agencies and request deletion of adverse information from the debtor's credit file.

The draft also creates a discretionary reconsideration process: within 30 days of a creditor's adverse determination the debtor may request reconsideration and submit additional information; Royal emphasized that seeking reconsideration is permissive and is not a required administrative step before filing in court.

The bill directs the Commissioner of Financial Regulation to develop and post a model Form A1 for debtors and creditors. Royal said DFR is the more natural agency to host forms for financial institutions and recommended consolidating form development with that agency. The draft also requires creditors to use a debtor's preferred contact method and to make reasonable efforts to use the debtor's preferred language.

The Attorney General's Office, represented by Assistant Attorney General Christopher Curtis, told the committee the draft addresses two major concerns his office raised in earlier testimony: protecting victims' confidentiality and clarifying rulemaking authority. "For those victims that are contacting state agencies about coerced debt, those victims would have their information be kept confidential, exempt from the Public Records Act," Curtis said, describing the confidentiality provision as responsive to the risk that perpetrators could locate or retaliate against victims if records were public.

Royal highlighted a broader confidentiality provision in the draft that would keep financial and personally identifying information shared under the subchapter confidential and exempt from public inspection or copying under the Public Records Act. She said privileged communications (attorney–client, certain health records) would remain protected unless the debtor expressly waives privilege or a law requires disclosure.

The draft preserves civil remedies. Royal said a proposal to add stand-alone penalty provisions under the Consumer Protection Act was removed and the bill defaults to existing consumer-protection remedies, including damages and attorneys' fees.

The draft sets an effective date of July 1, 2028, and Royal said the subchapter would apply to coerced debt incurred before that date. Committee members raised questions about whether statutes of limitations should be tolled during the review process so debtors do not lose legal options while a claim is pending.

The committee did not vote on the measure; Royal and committee members agreed to continue drafting and to return for additional testimony and review after the floor session.