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Senate advances consumer protections for coerced debt and grants banks temporary holds to curb exploitation
Summary
H.385 establishes a coerced‑debt framework under Vermont’s Consumer Protection Act, provides creditors and debtors defined workflows and remedies, and authorizes banks to place short transaction holds to investigate suspected financial exploitation; several provisions take effect on passage while coerced‑debt remedies are phased in through 2028.
The Senate ordered third reading of H.385 after a detailed floor report describing two linked consumer‑protection packages: new coerced‑debt protections for survivors of abuse and a bank transaction‑hold authority to address suspected financial exploitation.
Senator Ulick (reporting for Finance) said the coerced‑debt subchapter (chapter 24 95a in the bill) defines coerced debt, lays out documentation that can support a claim (law enforcement reports, sworn certifications from qualified professionals), provides a model sworn certification and establishes a timeline for creditor response: within 10 business days of a complete claim a creditor must cease collection attempts and notify credit reporting agencies that the debt is disputed; within 30 days the creditor must review documentation and within five days of concluding review must notify the debtor of its determination and basis.
The bill preserves creditors’ rights to enforce security interests (repossession) for secured debt, allows creditors to pursue perpetrators for repayment, and creates confidentiality protections to keep claimants’ personal information out of the public record. It also creates civil remedies and designates knowing, material violations as unlawful under Vermont’s Consumer Protection Act, enforceable by the Attorney General.
On bank actions, the bill permits covered financial institutions to take limited protective actions—including delaying or refusing transactions—if they reasonably suspect financial exploitation. Holds may last up to 15 business days, with a one‑time 15‑day extension, and institutions have immunity from civil, criminal and administrative liability for actions taken under the statute unless gross negligence or intentional misconduct is shown. The Finance reporter said reporting requirements will provide data to the Commissioner of Financial Regulation and noted implementation timelines: the bank‑hold provisions and certain technical corrections take effect on passage; coerced‑debt remedies phase in on 07/01/2028 to allow institutions and agencies time to prepare.
The committee reported a 7‑0‑0 vote to advance the bill. Senators speaking on the floor commended the cross‑sector stakeholder work, including testimony from credit unions, bankers, Vermont Legal Aid and the Department of Financial Regulation.
Sources: Finance committee floor report, testimony list, and committee vote as recorded on the floor.
