New York Enacts Law Establishing Right of Action for “Coerced Debt” Claims
New York Governor Kathy Hochul signed legislation amending the state’s general business law to establish a right of action for claims involving coerced debt. The law defines “coerced debt” as debt incurred through economic abuse, including circumstances involving fraud, duress, or manipulation, and outlines a formal process for consumers to dispute qualifying debts.
Under the new law, when a consumer submits both adequate documentation and a statement asserting that a debt is coerced, creditors are required to follow specific procedural steps. These include ceasing collection activity while the dispute is under review, notifying consumer reporting agencies of the dispute within 10 business days, and completing the review within 30 business days.
If the creditor determines the debt is not coerced and resumes collection activity, the law requires the creditor to provide the consumer with written notice of the determination. The notice must include the creditor’s good faith basis for the decision and supporting documentation. The law also requires that any supporting documentation provided to the consumer exclude personally identifiable information of another person.
In addition to outlining creditor obligations during a coerced debt dispute, the act creates civil liability for individuals who cause coerced debt. It also provides consumers with both a cause of action and an affirmative defense under § 604-cc, allowing them to challenge coerced debts in court. Available relief includes declaratory relief, as well as the deletion of adverse information from consumer reporting agencies. The act also allows the state attorney general to petition the court for injunctive relief on the individual who has violated this section of law.
The statute is scheduled to take effect 90 days after becoming law.
Staying Up to Date on State Collection Law Changes
As states continue to pass laws that establish new consumer protections and procedural requirements for collectors and creditors, monitoring state-by-state updates remains a key part of compliance planning.
ACA International’s State Guide Cohort helps agencies stay current with changes across all 50 states, the District of Columbia, and U.S. territories. The AI-enhanced electronic subscription is updated monthly and includes access to live webinars, past recordings, and session slides, helping compliance teams track new requirements and adjust policies accordingly.
