House Judiciary reviews H.385 to bar 'coerced debt,' shift burden to creditors and add remedies

The House Judiciary Committee examined bill H.385 on Feb. 19, a draft measure intended to protect survivors of domestic abuse, human trafficking and vulnerable-adult exploitation from debts incurred through coercion or fraud.

Representative Edie Granning, who introduced the bill, said it grew from work with advocates and lending institutions and aims to help people reclaim financial standing after abusive or coercive situations. “For the people who can use it, it will change their lives accordingly,” Granning said.

Maria Loral, legislative counsel, described the draft as a new subchapter of Vermont’s Consumer Protection Act and reviewed core elements for the committee. She defined coerced debt as debt obtained without the debtor’s knowledge or obtained through threats, intimidation or fraud: “Coerced debt is debt that’s unauthorized,” Loral said, adding it includes debts incurred under threats or intimidation.

Under the draft, a debtor would submit a sworn statement and provide at least one piece of "adequate documentation": (1) a law-enforcement report identifying the coerced debt; (2) a court order finding the debt coerced; or (3) a sworn certification from a qualified third-party professional (examples include licensed social workers, licensed attorneys, court-appointed advocates and certain licensed counselors).

Loral told the committee the bill would require creditors to investigate such claims and — if a creditor finds the claim compelling — to notify national credit reporting agencies that the entry should be removed. A notable evidentiary change in the draft is that once a debtor has established a prima facie case by sworn statement plus adequate documentation, “the creditor shall bear the burden of proving by a preponderance of the evidence that the debt is not coerced debt,” Loral said.

The draft sets civil remedies if a court finds debt was coerced: creditors and debtors could pursue the perpetrator for payments or costs; courts would be directed to protect debtors’ safety and privacy (redactions, remote hearings, sealing records); and confidentiality rules would limit disclosure of financial and personally identifying information except by court order. Time limits for actions are included (six years from discovery or from the end of coercion in many instances).

Committee members asked practical questions about scope and safeguards: whether the bill should explicitly allow out-of-state attorneys to serve as qualified third-party professionals, how joint debt and divorce scenarios would be litigated, and how creditor discovery might identify perpetrators without endangering survivors. Loral said some of those questions will be worked out with Commerce and other committees where consumer-protection and financial-regulation issues overlap.

The committee did not take a vote on H.385; members said they would continue to refine definitions, draft language on procedural protections and coordinate with Commerce and stakeholder groups before deciding whether to take jurisdiction.