Vermont committee debates H.385 coerced-debt protections as advocates and lenders clash over process and fraud safeguards

Montpelier — The Vermont House Committee on Commerce & Economic Development spent its Friday session scrutinizing H.385, a bill that would let people seek relief from debt incurred through coercion in contexts such as domestic abuse, human trafficking or exploitation of vulnerable adults.

Legislative counsel Maria Royal walked members through draft 1.1 and highlighted key changes to definitions, creditor duties, confidentiality, and the statute of limitations. She explained two central approaches for creditors after receiving a debtor’s coerced-debt statement: either the creditor must stop collection and seek court enforcement when necessary (the advocates’ option 1), or the creditor may review the claim and resume collection if it disputes the claim (option 2).

Advocates urged the committee to adopt the court-backstop approach. Grace Pazden, director of the Consumer and Homeowner Rights Project at Vermont Legal Aid, said the bill would create an accessible, nonlitigious path for many survivors. Citing a client example, Pazden said an older, developmentally disabled woman was coerced into cosigning a vehicle loan that resulted in a more-than-$10,000 deficiency and required more than a year and 100 attorney hours to resolve. "The creditor can just unilaterally decide to dispute it and resume collection," Pazden said, warning that option 2 would "entirely undermine the purpose…