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Senate Finance hears testimony on H.385 to shield coerced-debt victims; vote set for tomorrow
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Summary
The Senate Finance Committee considered H.385, which would define coerced debt, create a noncourt relief pathway and allow temporary holds on suspicious transactions. Advocates and AARP urged passage; bankers and credit unions supported parts but warned of potential fraud and lender losses. The committee put the bill on the calendar for a vote tomorrow.
The Senate Finance Committee took up H.385 on Thursday, a bill that would create a legal definition of "coerced debt," offer an accessible process outside court to clear victims' accounts and credit reports, and require supporting documentation before creditors must provide relief. The committee's chair said the bill will be scheduled for a vote tomorrow.
Advocates described how the bill would help vulnerable Vermonters who were manipulated into loans or credit they could not afford. "H.385 does three important things. First, it creates a legal definition of coerced debt that is going to provide much needed clarity to debtors, creditors, and courts," Grace Pazden, director of the Consumer and Homeowner Rights Project at Vermont Legal Aid, told the committee. Pazden recounted a case in which an older, developmentally disabled client co-signed a vehicle loan and was later threatened with a deficiency action for more than $10,000 after the vehicle was repossessed. She said litigation to protect that client took over a year and hundreds of attorney hours.
Supporters said the bill strikes a balance between access and safeguards. Pazden and other witnesses noted that a sworn statement plus "adequate documentation" ' a police report, a court order, or a sworn certification by a qualified professional ' would create a prima facie coerced-debt claim that creditors could accept or, if they dispute it on a good-faith basis, push to court. "That is considered adequate documentation of the coerced debt," Pazden said, adding the process aims to reduce the burden on survivors who typically lack attorney representation.
Policy director Charley Glisserman of the Vermont Network Against Domestic and ****** Violence urged the panel to consider evidence from other states. Pointing to a Dallas'Fort Worth pilot, Glisserman said the program received about 111 referrals over 18 months in an area of roughly 8,000,000 people; 38 percent of referrals were identified as potentially involving forced debt, and 19 survivors completed forced-debt claims. "For those 19 survivors, it was life changing," Glisserman said, and most individual coerced debts in that pilot were modest, often around $3,000 to $4,000.
AARP Vermont's advocacy director, Colin Hilliard, said the bill's transaction-hold provisions are critical to protect older adults and others from rapid-loss scams. "Temporary transaction freezes can slow things down and give investigators or a trusted contact a chance to get involved," Hilliard said, describing the holds as a victim-protection tool complementary to coerced-debt relief.
Industry witnesses signaled conditional support but raised implementation concerns. Chris Delia, president of the Vermont Bankers Association, said banks back the narrow transaction-hold language but warned that shifting due diligence could produce unknown write-offs and market impacts. "Ultimately, at the end of the day, it is their money, and we cannot stop them from taking it out," Delia said, describing the holds as a limited cooling-off tool that still leaves final decisions with customers. Delia said the bar for claiming coerced debt improved during negotiations but acknowledged the approach is untested in Vermont.
Credit union leaders expressed similar views. Carrie Allen, president of the Association of Vermont Credit Unions, said credit unions support the negotiated compromise and emphasized the importance of the annual reporting required of banks and credit unions that DFR will aggregate to spot trends and potential abuse.
Lawmakers pressed witnesses on fraud risks and whether nonpublic claims could be used repeatedly to defraud multiple lenders. Supporters replied that H.385 narrows eligibility to victims of domestic violence, elder abuse or human trafficking, requires professional supporting documentation, and phases in the law with reporting and study requirements to monitor outcomes.
The committee closed the hearing by moving H.385 toward a vote. The chair said she would place the bill on the committee's agenda for a vote tomorrow; witnesses and agencies will provide written materials and reports to help the committee monitor how the law performs if passed.
What happens next: The committee will vote on H.385 tomorrow and DFR will receive required reports and data intended to inform possible future adjustments to the law.
