Vermont shields vulnerable from coerced debt as nine states now have protections in place

Vermont has become the ninth US state to protect abuse survivors from the financial wreckage of coerced debt, after Governor Phil Scott signed legislation barring creditors and debt collectors from pursuing obligations that were accumulated through abuse.

Coerced debt arises when an abuser exploits fraud, threats, intimidation, identity theft, or outright force to run up debt in another person's name. The practice affects domestic violence survivors, victims of human trafficking, older adults, foster children, and people with disabilities; populations that often discover the damage only after collection activity has begun and their credit has already deteriorated.

Under the new Vermont law, once a victim submits documentation supporting a coerced debt claim, collection efforts must halt immediately.

They can only resume following a reasonable investigation into whether the debt was genuinely coerced. If that inquiry confirms coercion, any active lawsuit or arbitration seeking to collect the debt must be dismissed, existing judgments vacated, and consumer reporting agencies directed to scrub the relevant information from the victim's credit file.

The National Consumer Law Center (NCLC), whose Model State Coerced Debt Law served as the principal framework for the Vermont legislation, welcomed the action.

"We are pleased to see Governor Scott and the Vermont Legislature take action to help people who have been forced to take on debt because of abuse," said Carla Sanchez-Adams, senior attorney at NCLC. "This law provides relief for people with wrongfully damaged credit histories and ends the aggressive debt collection tactics that add to the suffering caused by coerced debt."

The stakes for victims who lack such protections are severe, as detailed in a newly published article by Sanchez-Adams and fellow NCLC senior attorney Andrea Bopp Stark in the NCLC Digital Library details how perpetrators weaponize debt to gain financial control over survivors' present and future economic lives.

Many victims only learn of unknown accounts once they have already been referred to collections, by which point employment checks, rental applications, and utility approvals may all have been compromised. Some are left with no option but predatory high-cost lenders, deepening their financial vulnerability and, in some cases, making it harder to leave an abusive relationship at all.

"Without state action, coerced debt victims will continue to face the negative economic impacts of the abuse, including damaged credit histories that can deprive a survivor of access to much-needed housing, employment, and utility resources," said Bopp Stark.

Vermont joins California, Connecticut, Illinois, Maine, Minnesota, Nevada, New York, and Texas in enacting statutory protections. The Vermont law is set to take effect July 1, 2028.