Fair Financial Services & The 88th Legislative Session - Protections for Victims of Financial Abuse

Julia (her name is changed to protect her privacy), from Grand Prairie, Texas, reached out to Texas Appleseed for help in the summer of 2022. She shared, “I have lost almost everything up to this point. I'm left with nothing but my narrative and hope. It has been precisely three years since my escape. What is still true, though, is that his real identity destroyed mine. Not only that, realistically his credit worthiness has become mine…[B]ecause I left doesn't mean I survived.”

Julia is a victim of coerced debt. Coerced debt is pervasive and affects the most vulnerable of populations, including survivors of family violence, human trafficking, and vulnerable adults. It is debt incurred by an abuser in the name of their victim through threat, force, or fraud.

When an abusive partner or caretaker takes out a coerced debt in their victim’s name, oftentimes, the victim is not aware that the debt has been taken out or is unable to stop the abuser from taking out the debt due to coercive control. In almost all cases of coerced debt, the victim’s credit score is negatively impacted, leading to problems renting an apartment, getting a job, or accessing low-cost credit and insurance. Individuals affected by coerced debt are often left in economic ruin and must pick up the pieces to rebuild their financial lives.

Impact of Coerced Debt on Vulnerable Texans

Data show that economic exploitation is prevalent in abusive relationships, with nearly one-third of Texans calling the National Domestic Violence Hotline reporting economic or financial abuse. A 2018-2019 survey of survivors of domestic violence who were clients of shelters and service providers in Texas and Louisiana found that 51% had coerced debts incurred by their abuser.

Many vulnerable adults also experience financial abuse. The FBI 2021 Elder Fraud Report found that across the United States, there was a 74% increase in financial losses for seniors from 2020 to 2021. In Texas, there were 6,798 reported victims of elder fraud, making it the state with the third highest number of elder fraud complaints.

Coerced Debt Protection Efforts

Texas Appleseed has been active in enhancing debt collection protections for victims of financial abuse, as well as ensuring that they have access to a variety of tools and resources to know what their rights are and how to legally assert them in the case of debt collection and debt collection lawsuits. In 2019, Texas Appleseed, in partnership with the Texas Coalition on Coerced Debt, led the efforts to expand the definition of identity theft to include victims of coerced debts, which created a pathway to financial recovery for victims of financial abuse, such as survivors of domestic violence and human trafficking, experiencing coerced debt.

During the 2021 state legislative session, Texas Appleseed and the coalition continued advocacy for victims of financial abuse by expanding the civil identity theft definition to include victims of coerced debt. This change enabled them to be declared victims of identity theft through a state district court process. These existing laws can be used as a defense in debt collection lawsuits in order to stop debt collection efforts on coerced debts, as well as to remove those debts from a credit report.

While these legislative changes in Texas, as well as the federal Debt Bondage Repair Act, have been impactful, victims continue to face ongoing debt collection actions for coerced debts despite filing police reports and taking the necessary steps to establish the debts as identity theft. Often, victims of coerced debt need a lawyer to be successful in obtaining relief, but so many do not have that luxury.

Policy Recommendations & Resources

Texas Appleseed is working with the Texas Coalition on Coerced Debt this session to build on existing protections and make them easier for victims to access. SB 836 makes important progress to streamline access to coerced debt protections for victims of family violence, victims of human trafficking, and vulnerable older adults. The bill:

• establishes a hard stop for collection of consumer debts that are shown to be the result of identity theft, including coerced debts; and
• allows for a trauma-informed option for victims of family violence, victims of human trafficking, and vulnerable adults to demonstrate they are victims of coerced debt and identity theft.

These important changes will ensure that the protections already established in state law are accessible to those most in need.

Texas Appleseed has created several helpful toolkits to address coerced debt and debt collection. In partnership with, and as a member of, the Texas Coalition on Coerced Debt, Texas Appleseed created the Coerced Debt Toolkit: Addressing Identity Theft for Survivors of Financial Abuse, which aims to help survivors of domestic violence struggling with coerced debts by providing information on state and federal identity theft protections. Additionally, Texas Appleseed developed the My Debt Collection Rights in Texas toolkit to help people struggling with debt collectors by providing information on Texas state law and resources on debt collection.