Bill H.385 aims to combat coerced debt by prohibiting its occurrence and establishing protections and remedies for victims. It introduces a new subchapter, "Coerced Debt," under 9 V.S.A. chapter 63, defining key terms such as "coerced debt," "debtor," and "creditor." The bill outlines the circumstances under which debt can be classified as coerced, including unauthorized use of personal information or economic abuse, and specifies the documentation required to support claims, such as police reports or certifications from qualified professionals. Creditors are mandated to cease collection efforts upon receiving a debtor's statement of coerced debt and must notify consumer reporting agencies of the dispute, providing written notices in both English and Spanish.

The bill establishes that a debtor is not liable for coerced debt and can assert this defense in any legal forum. It requires creditors to use only the contact information provided by the debtor for communications related to coerced debt and prohibits the disclosure of this information without the debtor's express written consent. Creditors who fail to comply may be liable for damages, including actual damages and additional penalties. Furthermore, the bill mandates the Attorney General to amend Vermont's Consumer Protection Rule on Debt Collection by January 1, 2027, to align with the new regulations and enhances procedures for credit reporting agencies regarding disputes over coerced debt. The act is set to take effect on July 1, 2026, and includes provisions for civil legal remedies against perpetrators of coerced debt.

Statutes affected:
As Introduced: 9-2480d, 9-2480k