STATE OF NEW YORK ________________________________________________________________________ 1309 2023-2024 Regular Sessions IN ASSEMBLY January 17, 2023 ___________ Introduced by M. of A. L. ROSENTHAL, KELLES -- read once and referred to the Committee on Consumer Affairs and Protection AN ACT to amend the general business law, in relation to establishing a right of action for claims arising out of coerced debts The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The general business law is amended by adding a new article 2 29-HHH to read as follows: 3 ARTICLE 29-HHH 4 ACTIONS INVOLVING COERCED DEBTS 5 Section 604-aa. Definitions. 6 604-bb. Notice of coerced debt. 7 604-cc. Coerced debt cause of action and affirmative defense. 8 § 604-aa. Definitions. As used in this article, the following terms 9 shall have the following meanings: 10 1. "Action" means any civil judicial proceeding as defined in section 11 one hundred five of the civil practice law and rules. 12 2. "Adequate documentation of coerced debt" means documentation that 13 identifies a particular debt, or a portion thereof, as coerced debt, 14 describes the circumstances under which such coerced debt was incurred, 15 and takes the form of any of the following: 16 (a) a police report; 17 (b) a federal trade commission identity theft report that identifies a 18 particular debt, or portion thereof, as a coerced debt; 19 (c) an order from a court of competent jurisdiction setting forth 20 findings of coerced debt; or 21 (d) a written verification, from a qualified third party to whom the 22 debtor reported the coerced debt, which shall be satisfied by any sworn 23 or notarized statement including the required information as well as the 24 letterhead, address, and telephone number of such qualified third 25 party's employer or, if self-employed, of such qualified third party. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD05065-01-3A. 1309 2 1 3. "Coerced debt", in the context of economic abuse, means debt that 2 was incurred as a result of fraud, duress, intimidation, threat, force, 3 coercion, manipulation, undue influence, the non-consensual use of the 4 debtor's personal information, or similar economic abuse perpetrated 5 against a debtor. 6 4. "Creditor" means any person, firm, corporation or organization to 7 whom a debt is owed, due, or asserted to be due or owed, or any assignee 8 for value of said person, firm, corporation or organization, including 9 any debt collection agency or debt collector as defined by section six 10 hundred of this chapter; provided, however, that "creditor" shall not 11 include a person to whom a debt is allegedly owed, due, or asserted to 12 be due or owed, where the person asserting such claim caused the debt to 13 arise by engaging in one or more acts of coercion, as identified in 14 subdivision three of this section, against the debtor. 15 5. "Debt" means any obligation or alleged obligation of a consumer to 16 pay money arising out of a transaction in which the money, property, 17 insurance, or services which are the subject of such transaction are 18 primarily for personal, family, or household purposes, whether or not 19 such obligation has been reduced to a judgment. 20 6. "Debtor" means any natural person who owes or who is asserted to 21 owe a debt. 22 7. "Economic abuse", in the context of intimate relationships or 23 relationships between family or household members as defined by section 24 four hundred fifty-nine-a of the social services law, relationships 25 between victims of human trafficking and traffickers, or relationships 26 between children, the elderly, or individuals eligible for protective 27 services under subdivision one of section four hundred seventy-three of 28 the social services law, and their caregivers, means behavior that is 29 coercive, deceptive, manipulative, or that controls, restrains, or 30 sabotages a person's ability to acquire, use, or maintain economic 31 resources to which they are entitled, including but not limited to using 32 coercion, fraud, or manipulation to: 33 (a) restrict a person's access to money, assets, credit, or financial 34 information; 35 (b) unfairly use a person's personal information or personal economic 36 resources, including money, assets, and/or credit, for one's own advan- 37 tage; or 38 (c) exert undue influence over a person's financial and economic 39 behavior or decisions, including but not limited to forcing default on 40 joint or other financial obligations, exploiting powers of attorney, 41 guardianship, or conservatorship, or failing or neglecting to act in the 42 best interests of a person to whom one has a fiduciary duty. 43 8. "Personal information" includes, but is not limited to, an address, 44 telephone or mobile phone number, driver registration number or non-dri- 45 ver identification card number, social security number, email address, 46 social media profile or screen name, place of employment, employee iden- 47 tification number, mother's maiden name, financial services account 48 number or code, savings account number or code, checking account number 49 or code, debit or credit card number or code, automated teller machine 50 number or code, electronic serial number, any personal identification 51 number or password of a debtor, and a debtor's personal documents, 52 including, but not limited to, such debtor's driver's license or non- 53 driver identification card, passport, permanent resident card, visa, 54 birth certificate, social security card, and any copies thereof or 55 information contained therein. "Personal identification number or pass- 56 word", as used in this subdivision, means any number or alphanumericA. 1309 3 1 code which may be used alone or in conjunction with any other informa- 2 tion to assume the identity of another person or access financial 3 resources or credit information of another person. 4 9. "Pleading" means any complaint, petition, counterclaim, cross- 5 claim, interpleader complaint, third-party complaint or any similar 6 papers asserting a claim and demand for relief required to be filed with 7 the court pursuant to rule twenty-one hundred two of the civil practice 8 law and rules, the rules of the chief administrator of the courts, or 9 any local rule or practice established by the court. 10 10. "Qualified third party" means any (a) law enforcement officer; (b) 11 employee of a court of the state; (c) attorney, physician, psychiatrist, 12 psychologist, social worker, registered nurse, therapist, or clinical 13 professional counselor licensed to practice in any state; (d) person 14 employed by or working on behalf of a government or non-profit office, 15 agency, or service that advises or provides services to persons regard- 16 ing domestic violence, family violence, human trafficking, or abuse of 17 children, the elderly, or dependent adults; or (e) member of the clergy 18 of a church or religious society or denomination. 19 § 604-bb. Notice of coerced debt. 1. Upon receipt of the following, a 20 creditor shall cease collection activities until completion of the 21 review under subdivision three of this section: 22 (a) adequate documentation of coerced debt; and 23 (b) the debtor's sworn or notarized statement that a particular debt 24 being collected, or portion thereof, is coerced debt. 25 2. If a debtor notifies a creditor orally that a particular debt being 26 collected, or portion thereof, is coerced debt, such creditor shall 27 notify such debtor, orally or in writing, that such debtor's notifica- 28 tion shall be in writing. If a debtor notifies a creditor in writing 29 that a particular debt being collected, or portion thereof, is coerced 30 debt, but omits information under subdivision one of this section, and 31 if such creditor does not cease such collection activities, such credi- 32 tor shall provide written notice to such debtor of the additional infor- 33 mation that is required. 34 3. (a) Within ten business days of receiving the information under 35 subdivision one of this section, the creditor shall, if such creditor 36 furnishes adverse information about the debtor to a consumer reporting 37 agency, notify such consumer reporting agency that the account is 38 disputed. 39 (b) Within thirty business days of receiving the information under 40 subdivision one of this section, the creditor shall complete a review 41 considering all information provided by the debtor and other information 42 available to such creditor in such creditor's file. In connection with 43 such review and communication of the outcome of such review, the credi- 44 tor shall: 45 (i) neither directly nor indirectly contact the individual accused of 46 causing the coerced debt to be incurred; 47 (ii) use only the contact information the debtor provides with the 48 information under subdivision one of this section when attempting to 49 contact such debtor and shall not use any other contact information, 50 even if associated with the account under review, when attempting to 51 contact such debtor; and 52 (iii) not disclose the contact information the debtor provides with 53 the information under subdivision one of this section to any other 54 person, including, but not limited to, joint account holders, without 55 such debtor's express written authorization.A. 1309 4 1 (c) Within five business days of completing the review under paragraph 2 (b) of this subdivision, a creditor who recommences collection activ- 3 ities based on such review shall notify the debtor in writing of such 4 creditor's determination and the good faith basis for such determi- 5 nation, and shall enclose all documents and information upon which such 6 creditor bases its determination therewith. Such written notice shall 7 include a notice of the debtor's right to appeal under subdivision four 8 of this section. 9 (d) Within five business days of completing the review under paragraph 10 (b) of this subdivision, a creditor who ceases collection activities 11 under this section and, based on such review, does not recommence such 12 collection activities, shall: 13 (i) notify the debtor in writing that it is ceasing collection activ- 14 ities based on such debtor's claim of coerced debt; 15 (ii) contact any consumer reporting agencies to which it furnishes 16 information about the debtor and the particular debt and instruct such 17 consumer reporting agencies to delete such information; and 18 (iii) if the creditor is also a debt collector or debt collection 19 agency, as defined in section six hundred of this chapter, notify the 20 original creditor that it has ceased collection activities because the 21 debt was found to be a coerced debt. 22 4. A debtor who receives written notice under paragraph (c) of subdi- 23 vision three of this section that the creditor will recommence 24 collection activities based on such creditor's determination under 25 subdivision three of this section shall have a right to appeal such 26 determination within thirty days of the date of mailing of such written 27 determination. Such appeals process shall be governed by the procedures 28 under subdivisions one through three of this section. Submitting an 29 appeal shall not be a condition to bringing an action under section six 30 hundred four-cc of this article. 31 5. No inference or presumption that the debt is valid or invalid, or 32 that the debtor is liable or not liable for such debt, shall arise if 33 the creditor decides after completing the review under subdivision three 34 of this section to cease or recommence the debt collection activities. 35 The exercise or non-exercise of rights under this section shall not 36 constitute a waiver of any other right or defense of the debtor or debt 37 collector. 38 6. Ceasing collection activities under this section shall not toll the 39 statute of limitations period on any action to collect the debt. 40 7. If at any time any individual or entity, including, but not limited 41 to the creditor, such creditor's assignor, or any assignee, recommences 42 collection activities on the debt after ceasing collection activities on 43 such debt based on such creditor's review of such debtor's notice of 44 coerced debt, such debtor may submit a subsequent notice of coerced 45 debt. A subsequent notice of coerced debt submitted under this subdivi- 46 sion shall be governed by subdivisions one through six of this section. 47 8. A debtor shall have a cause of action pursuant to section six 48 hundred four-cc of this article against a creditor for any violation of 49 this section. Such debtor shall be entitled to statutory damages of one 50 thousand dollars, actual damages, if any, and the costs and attorneys' 51 fees reasonably incurred in bringing such action. Where a creditor's 52 noncompliance with this section is deemed willful, a debtor shall be 53 entitled to punitive damages. 54 § 604-cc. Coerced debt cause of action and affirmative defense. 1. A 55 person shall not cause another person to incur a coerced debt. A person 56 who causes another person to incur a coerced debt in violation of thisA. 1309 5 1 subdivision shall be civilly liable to the creditor, and/or the debtor 2 in whose name such coerced debt was incurred if such debtor has already 3 paid all or part of such coerced debt, for the amount of such debt, or 4 portion thereof, determined by the court to be a coerced debt, as well 5 as such creditor's and/or debtor's costs and attorneys' fees reasonably 6 incurred in bringing the action. 7 2. (a) A debtor shall have a cause of action against a creditor in any 8 court having jurisdiction to issue a declaratory judgment establishing 9 that a debt or portion of a debt asserted to be owed to such creditor is 10 a coerced debt. Notwithstanding section one thousand one of the civil 11 practice law and rules, any individual alleged to have caused such 12 coerced debt to be incurred shall not be a necessary party to such 13 action. Such action shall not be commenced and maintained unless the 14 following conditions are satisfied: 15 (i) (1) the debtor provides by certified mail, overnight delivery, or 16 other method that allows for confirmation of the delivery date, the 17 notice of coerced debt or subsequent notice of coerced debt under 18 section six hundred four-bb of this article, provided, however, that 19 receipt of the notice of coerced debt shall not be a condition to bring- 20 ing such action if it is sent in a properly addressed envelope; and 21 (2) the thirty-day period under paragraph (b) of subdivision three of 22 section six hundred four-bb of this article has expired and the debtor 23 has not received written notice that collection activities have ceased; 24 or 25 (ii) the debtor receives a written determination under paragraph (c) 26 of subdivision three of section six hundred four-bb of this article that 27 the particular disputed debt is not coerced debt. 28 (b) The submission of an appeal under subdivision four of section six 29 hundred four-bb of this article of the creditor's decision to recommence 30 debt collection activities based on such creditor's review of the 31 debtor's notice of coerced debt is not a condition to commencing an 32 action under this subdivision. 33 3. In an action under subdivision two of this section, a debtor shall 34 plead the allegations of coerced debt with particularity and shall 35 attach the documents provided to the creditor pursuant to subdivision 36 one of section six hundred four-bb of this article to any complaint. 37 4. A debtor who establishes by a preponderance of the evidence in an 38 action pursuant to subdivision two of this section that a debt or 39 portion of a debt asserted to be owed to the creditor is coerced debt 40 shall be entitled to the following relief: 41 (a) a declaratory judgment stating that the debt or portion thereof is 42 coerced debt and that the alleged debtor shall not be liable for such 43 coerced debt; 44 (b) an order enjoining or restraining the creditor from holding or 45 attempting to hold the debtor personally liable for the coerced debt or 46 attempting to obtain or enforce any judgment thereon against such debtor 47 and enjoining and restraining all future collection activities with 48 respect to such debt; 49 (c) an order dismissing any other cause of action brought by the cred- 50 itor to enforce or collect the coerced debt from the debtor; 51 (d) if the creditor has furnished adverse information to a consumer 52 reporting agency with respect to such coerced debt, an order directing 53 the creditor to notify such agency to delete all such adverse informa- 54 tion; and 55 (e) the costs and attorneys' fees reasonably incurred in bringing such 56 action.A. 1309 6 1 5. In any action by a creditor against a debtor to collect a debt, it 2 shall be an affirmative defense to such action that all or a portion of 3 the debt is coerced debt. Providing notice to the creditor under 4 section six hundred four-bb of this article shall not be a prerequisite 5 to asserting such defense; provided, however, the documents described in 6 subdivision one of section six hundred four-bb of this article shall be 7 annexed to the debtor's answer. A debtor who prevails on an affirmative 8 defense of coerced debt shall be entitled to the costs and attorneys' 9 fees reasonably incurred in defending against the action. Notwithstand- 10 ing section one thousand one of the civil practice law and rules, any 11 individual alleged to have caused such coerced debt to be incurred shall 12 not be or become a necessary party to such action. 13 6. An action pursuant to subdivision two of this section shall be 14 commenced within four years after the date on which the debtor provided 15 the notice of coerced debt pursuant to section six hundred four-bb of 16 this article to the creditor; provided, however, that if such creditor, 17 its assignor, or any assignee recommences collection activities on the 18 debt after ceasing collection activities on such debt based on such 19 creditor's review of the debtor's claim of coerced debt, such debtor 20 shall have the right to file a subsequent notice of coerced debt pursu- 21 ant to subdivision seven of section six hundred four-bb of this article 22 and the statute of limitations shall commence on the date on which such 23 debtor provided such subsequent notice of coerced debt. 24 7. If requested by the debtor, the court presiding over any action in 25 which coerced debt is raised as a claim or affirmative defense shall 26 take appropriate steps necessary to prevent abuse of such debtor or an 27 immediate family member of such debtor, including but not limited to the 28 sealing of court records, the redaction of such debtor's or their imme- 29 diate family member's personal information, and/or directing that any 30 disposition or hearing be held remotely. 31 8. The provisions of this article shall not be construed so as to 32 prevent a creditor from enforcing any claim or collecting judgment aris- 33 ing out of a lawful debt or portion thereof from any other person or 34 entity other than the coerced debtor. 35 9. For debts secured by real or personal property, the private cause 36 of action and affirmative defense authorized by this section shall 37 affect only the debtor's liability for any deficiency after the foreclo- 38 sure, repossession, or surrender and disposition of the subject collat- 39 eral. 40 § 2. This act shall take effect on the ninetieth day after it shall 41 have become a law.