New York’s New Coerced Debt Law: A Significant Expansion of Consumer Protection and Economic Abuse Remedies
Featured in WNY Family Magazine, March 2026 issue, pages 28-29
The Center for Elder Law & Justice (CELJ) is a non-profit, civil legal services organization providing assistance to individuals throughout Western New York. CELJ has offices in Erie, Niagara, and Chautauqua County. CELJ's mission is to improve the quality of life for older, disabled, and low-income adults through the provision of free legal services, primarily in Western New York. CELJ uses the legal system to ensure that its’ clients may live independently and with dignity.
New York recently joined a host of states in passing legislation that allows a victim of economic abuse to free themselves of debts that they are not responsible for. Governor Kathy Hochul signed Senate Bill S1353/A3038B into law on December 19, 2025, creating new statutory rights and procedures for individuals subjected to financial exploitation through coercion, fraud, or abuse. The law will take effect 90 days after the signing and presents a significant protection for financial abuse victims throughout New York State.
The Center for Elder Law & Justice’s Consumer Protection Department represents many clients who are victims of financial abuse. Our clients are saddled with debts incurred through fraud or coercion from another individual. Many individuals entrust another to help them with their finances, only to become victim to debts that skyrocket with high interest rates. Victims of economic abuse can be at extreme risk of losing their homes and their income as a result of the coerced debt. These debts can make it impossible for victims to find an apartment or apply for a loan. Without this new law, victims and their advocates often ran into dead-ends trying to advocate with creditors as to why they should not be held responsible for a debt. Victims are often told that the dispute lies between themself and the abuser, and that they are still responsible for the debt.
Coerced debt is a form of economic abuse where an abuser manipulates and forces a victim to incur a debt. This law was initially framed in a domestic violence context but has been expanded to include relationships between caregivers; family members; as well as individuals exploiting a victim through a fiduciary relationship, such as a power of attorney or guardian. Examples of coerced debt can include forcing a person to sign a mortgage, auto loan, or credit card application. On a broader scope, this law would benefit anyone who incurs a debt where an abuser receives a financial benefit. It is important to remember that these new protections pertain only to debts incurred on or after the time the law takes effect.
There is a detailed process that must be followed to make a showing that a debt is coerced. An individual who seeks protection under this law must provide proper documentation and a sworn statement under the penalty of perjury that the debt is coerced. Proper supporting documentation may include a report made with a federal, state, or local law enforcement agency; an identity theft report made with the Federal Trade Commission; and/or a statement from a qualified third party (such as a social worker, attorney, doctor, nurse, therapist, employees from non-profit organizations that work with victims of domestic violence, clergy, elected officials, and law enforcement officers) verifying that the individual was a victim of coercion and did not freely choose to take on this debt. Victims can make the same showing as a defense to a lawsuit that is brought against them for the debt as well.
The creditor has certain responsibilities they must follow once an initial showing of a coerced debt is made by a victim. Upon receipt of the victim's sworn statement and accompanying documentation, creditors have ten days to cease collection activity until completion of their review. If the debt has been listed on a victim’s credit report, creditors must also notify the credit reporting agency that the debt is disputed. Creditors must complete their investigation within thirty days.
The creditor must then determine whether the debt is coerced or not. If it is found to be coerced, collection against the victim must stop and the debt must be removed from the victim’s credit report. If the victim provides sufficient proof that the debt is coerced as a defense to a lawsuit, the lawsuit can be withdrawn by the creditor or it can be dismissed by the court. If the creditor deems the debt to be coerced, this law gives them the ability to pursue collection activity against the abuser.
If the creditor does not find sufficient showing that the debt has been coerced, they must notify the victim in writing of their decision. As mentioned, the victim may still assert that the debt is coerced in court if they are sued for the debt. Additionally, the victim may bring their own legal action against the creditor and seek a judgment, finding that the debt is coerced. If successful, the creditor would then be required to cease collection and remove the debt from any credit reports.
This law is set to take effect in March, so much remains to be seen as to how this will look in practice. Providing the sworn statement and accompanying evidence alone is not enough to relieve the victim of the debt. A victim is relieved of the debt only after the creditor finds there to be coercion, or if a court determines that the debt is coerced. But many advocates still see this as a big step in giving a voice to victims of economic abuse throughout New York State. Non-profit legal service providers like the Center for Elder Law & Justice look forward to the opportunity to advocate for victims to help them maintain their financial well-being while holding abusers accountable.
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