Prohibits creditors from enforcing a consumer debt incurred as a result of fraud, duress, intimidation, threat, force, identity theft, exploitation of the debtor's personal information or similar economic abuse perpetrated against a debtor; establishes a right of action by the debtor for declaratory and injunctive relief against creditors for violations.
STATE OF NEW YORK
________________________________________________________________________
10667
IN ASSEMBLY
August 12, 2022
___________
Introduced by COMMITTEE ON RULES -- (at request of M. of A. L. Rosen-
thal) -- 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. Prohibited practices; right of action.
7 604-cc. Notice of intention to commence an action; requirements.
8 604-dd. Exceptions.
9 § 604-aa. Definitions. As used in this article, the following terms
10 shall have the following meanings:
11 1. "Action" means any civil judicial proceeding as defined in section
12 one hundred five of the civil practice law and rules.
13 2. "Consumer claim" means any obligation of a natural person for the
14 payment of money or its equivalent which is or is alleged to be in
15 default and which arises out of a transaction wherein credit has been
16 offered or extended to a natural person, and the money, property or
17 service which was the subject of the transaction was primarily for
18 personal, family or household purposes. Such term includes an obligation
19 of a natural person who is a co-maker, endorser, guarantor or surety as
20 well as the natural person to whom such credit was originally extended.
21 3. "Coerced debt" means debt, as defined in subdivision six of section
22 six hundred of this chapter that was incurred as a result of fraud,
23 duress, intimidation, threat, force, identity theft, exploitation of the
24 debtor's personal information or similar economic abuse perpetrated
25 against a debtor or alleged debtor.
26 4. "Creditor" means any person, firm, corporation or organization to
27 whom a consumer claim is owed, due or asserted to be due or owed, or any
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15989-01-2
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1 assignee for value of said person, firm, corporation or organization,
2 including any debt collection agency or debt collector as defined in
3 section six hundred of this chapter; provided, however that "creditor"
4 shall not include a person to whom a consumer claim is allegedly owed,
5 due or asserted to be due or owed where the person asserting such claim
6 caused the claim to arise by engaging in one or more acts of coercion
7 identified in subdivision three of this section against the debtor or
8 alleged debtor.
9 5. "Debtor" means any natural person who owes or who is asserted to
10 owe a consumer claim.
11 6. "Personal information" means, in addition to the definition of such
12 term provided in subdivision six of section eight hundred ninety-nine-
13 aaa of this chapter, an address, telephone number, driver's registration
14 number or non-driver identification card number, social security number,
15 email address, social media profile or screen name, place of employment,
16 employee identification number, mother's maiden name, financial services
17 account number or code, savings account number or code, checking account
18 number or code, debit or credit card number or code, automated teller
19 machine number or code, electronic serial number or any personal iden-
20 tification number of a debtor or alleged debtor. As used in this subdi-
21 vision, "personal identification number" means any number or code which
22 may be used alone or in conjunction with any other information to assume
23 the identity of another person or access financial resources or credit
24 of another person.
25 7. "Pleading" means any complaint, petition, counterclaim, cross-
26 claim, interpleader complaint, third-party complaint or any similar
27 papers asserting a claim and demand for relief required to be filed with
28 the court pursuant to rule twenty-one hundred two of the civil practice
29 law and rules, the rules of the chief administrator of the courts, or
30 any local rule or practice established by the court.
31 8. "Qualified third-party professional" means any of the following:
32 (a) A rape crisis counselor, as defined in subdivision two of section
33 forty-five hundred ten of the civil practice law and rules.
34 (b) A domestic violence advocate, as defined in subdivision five of
35 section forty-five hundred ten of the civil practice law and rules.
36 (c) A court-appointed special advocate appointed pursuant to article
37 twenty-one-c of the judiciary law.
38 (d) An attorney appointed pursuant to the provisions of part four of
39 article two of the family court act.
40 (e) A board certified or board eligible psychiatrist or psychologist.
41 (f) A licensed marriage and family therapist, as defined in section
42 eighty-four hundred three of the education law.
43 (g) A licensed master social worker or licensed clinical social work-
44 er, as defined in article one hundred fifty-four of title eight of the
45 education law.
46 (h) A social worker or caseworker employed by an adult protective
47 services agency pursuant to title one of article nine-b of the social
48 services law or a child protective services agency pursuant to title six
49 of article six of the social services law.
50 § 604-bb. Prohibited practices; right of action. 1. (a) No creditor or
51 agent of such creditor shall claim, or attempt or threaten to enforce or
52 otherwise assert any rights with respect to any debt when such creditor
53 knows or has reason to know that such debt is a coerced debt as defined
54 in subdivision three of section six hundred four-aa of this article.
55 (b) For the purposes of this section, a creditor "knows or has reason
56 to know" that a debt is a coerced debt when such creditor has received a
A. 10667 3
1 notice of intention to file an action from an alleged debtor pursuant to
2 section six hundred four-cc of this article; provided, however that
3 nothing in this section shall be construed so as to restrict the power
4 of a court to find that such knowledge or reason to know existed prior
5 to a creditor's receipt of any such notice of intention on the basis of
6 other evidence properly before it.
7 2. An alleged debtor aggrieved by a violation of this section shall
8 have a right of action in any court of appropriate jurisdiction for the
9 following relief:
10 (a) A declaratory judgment stating that the debt is invalid and that
11 the alleged debtor is not liable for such coerced debt.
12 (b) An order enjoining or restraining the alleged creditor from hold-
13 ing or attempting to hold the alleged debtor personally liable for the
14 coerced debt or attempting to obtain or enforce any judgment thereon
15 against such alleged debtor and enjoining and restraining all future
16 collection activities with respect to such debt.
17 (c) An order dismissing any other cause of action brought by the
18 alleged creditor to enforce or collect the coerced debt from the alleged
19 debtor.
20 (d) If the alleged creditor has furnished adverse information to a
21 consumer credit reporting agency with respect to such coerced debt, an
22 order directing the alleged creditor to notify such agency to delete all
23 such adverse information.
24 3. In any action alleging a violation of this section, it shall be the
25 burden of the party asserting such violation to plead and prove by a
26 preponderance of the evidence that:
27 (a) The alleged debt is a coerced debt; and
28 (b) The creditor knew or had reason to know that the debt was coerced
29 and thereafter engaged in collection activities in violation of this
30 section.
31 4. In any action by a creditor against an alleged debtor arising out
32 of a consumer claim, as defined in subdivision two of section six
33 hundred four-aa of this article, such alleged debtor may interpose a
34 claim for relief pursuant to this section by the filing and service upon
35 such creditor or any appropriate third-party of any pleading authorized
36 by the civil practice law and rules.
37 5. (a) An action pursuant to this section shall be commenced within
38 four years after the date on which the alleged debtor knew, or with
39 reasonable diligence should have discovered the existence of the coerced
40 debt; provided, however, that no such action shall be commenced or main-
41 tained unless such alleged debtor shall have provided written notice of
42 intention to commence such action in accordance with the provisions of
43 section six hundred four-cc of this article.
44 (b) For the purposes of this article, an action is "commenced" by the
45 filing and service of a pleading asserting a claim and demand for relief
46 pursuant to this section by an alleged debtor against a creditor or
47 other appropriate party in accordance with the requirements of the civil
48 practice law and rules.
49 6. No pleading asserting a demand for relief pursuant to this article
50 shall be accepted for filing unless:
51 (a) At least thirty days shall have elapsed from the date that the
52 notice of intention to commence an action was sent by the alleged debtor
53 to the creditor in accordance with the provisions of section six hundred
54 four-cc of this article; and
55 (b) A copy of such notice of intention and any response thereto shall
56 be annexed to such pleading.
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1 7. Actions and proceedings brought pursuant to this article may be
2 instituted in any court of this state having jurisdiction to issue an
3 injunction. Such court shall exercise exclusive, continuing jurisdiction
4 over such action or proceeding for a period of ten years following the
5 commencement of such action or proceeding to allow for the joinder of
6 claims arising out of coerced debts against the same creditor or credi-
7 tors, regardless of whether a final judgment has been entered as to any
8 such creditor in the original action or proceeding. The court may, prior
9 to the expiration of such ten-year time period, extend its continuing
10 jurisdiction over any such matter where it finds good cause for such
11 extension.
12 8. In the event that any action or proceeding brought by an alleged
13 debtor pursuant to this section shall be found by the court to be frivo-
14 lous, as defined in section eighty three hundred three-a of the civil
15 practice law and rules, the creditor shall be entitled to recover from
16 the alleged debtor the costs and attorney's fees reasonably incurred in
17 defending such frivolous action, claim, counterclaim, defense or cross-
18 claim or other pleadings.
19 § 604-cc. Notice of intention to commence an action; requirements. 1.
20 An alleged debtor shall, prior to commencement of any action pursuant to
21 this article, provide a written notice of intention to commence such
22 action at least thirty days prior to the commencement thereof in accord-
23 ance with the provisions of this section.
24 2. (a) The notice of intention described in subdivision one of this
25 section shall be delivered to the alleged creditor's principal office,
26 or an agent designated for service of process upon such creditor as
27 indicated by the business entity records available on the department of
28 state's website.
29 (b) Every such notice of intention shall identify the allegedly
30 coerced debt and shall include a description of specific facts support-
31 ing the allegations of coercion with respect to such debt. Such state-
32 ment shall contain or be accompanied by at least one or more of the
33 following:
34 (i) A copy of a valid police report filed by the alleged debtor indi-
35 cating that the debt being collected by the creditor was incurred as a
36 result of fraud, duress, intimidation, threat, force, identity theft,
37 exploitation of the debtor's personal information or other economic
38 abuse.
39 (ii) A copy of a federal trade commission ID theft report finding that
40 the debt was incurred as a result of fraud, duress, intimidation,
41 threat, force, identity theft, exploitation of the debtor's personal
42 information or other economic abuse.
43 (iii) An order of protection issued pursuant to section 530.12 of the
44 criminal procedure law or article eight of the family court act relating
45 to domestic violence, an order of protection issued pursuant to article
46 three of the family court act relating to juvenile delinquency or pursu-
47 ant to article seven of the family court act relating to persons in need
48 of supervision, or pursuant to article ten of the family court act
49 relating to placement and permanency proceedings, a court order enjoin-
50 ing or otherwise addressing elder abuse or abuse of dependent children
51 or adults, or any judicial or quasi-judicial order or judgment involving
52 the alleged debtor that identifies instances of fraud, duress, intim-
53 idation, threat, force, or exploitation of the debtor's personal infor-
54 mation with respect to the debt sought to be collected.
55 (iv) (A) Documents or records of a qualified third-party professional,
56 as defined in subdivision five of section six hundred four-aa of this
A. 10667 5
1 article, consisting of information acquired while acting in a profes-
2 sional capacity relating to fraud, duress, intimidation, threat, force,
3 or exploitation of the debtor's personal information with respect to the
4 debt sought to be collected, provided such documentation satisfies the
5 requirements set forth in clause (B) of this subparagraph.
6 (B) No document or record described in clause (A) of this subparagraph
7 shall satisfy the requirements of this section unless such documentation
8 is signed by the qualified third-party professional and displays the
9 letterhead, address and phone number of the office, agency, institution
10 or other organization at which such professional is employed or engages,
11 or the letterhead, address and phone number of any self-employed quali-
12 fied professional, regardless of whether such professional was or is
13 receiving financial compensation for such professional's services.
14 3. (a) Upon receipt of a notice of intention and the supporting mate-
15 rials described in subdivision two of this section, the creditor shall
16 cease all collection activities with respect to the debt identified
17 therein for not less than thirty days following such receipt and shall
18 review and consider all of the information provided in such notice along
19 with any other relevant information available to such creditor and shall
20 make a determination thereon as provided in paragraph (b) of this subdi-
21 vision.
22 (b) (i) If, after review of the information provided in the notice of
23 intention and accompanying materials and any other relevant information
24 available to the creditor, the creditor determines that the information
25 so provided does not establish that the debt in question is a coerced
26 debt, the creditor shall notify the alleged debtor in writing of such
27 determination stating the basis therefore prior to resuming or commenc-
28 ing collection activities with respect to such debt; provided, however,
29 that in no event shall a creditor resume collection activities with
30 respect to any such debt before at least thirty days shall have elapsed
31 after the receipt of any such notice of intention.
32 (ii) In the event that the creditor determines that the debt in ques-
33 tion is a coerced debt, such creditor shall notify the alleged debtor in
34 writing of such determination, and:
35 (A) If the creditor has furnished adverse information to a consumer
36 credit reporting agency, notify the agency to delete that information;
37 and
38 (B) Notify any other interested creditor that debt collection activ-
39 ities have been terminated based upon the debtor's claim of coerced
40 debt.
41 (c) No action or proceeding authorized by section six hundred four-bb
42 of this article shall be commenced or continued against any creditor
43 pursuant to this article after such creditor has notified the alleged
44 debtor and all necessary parties that it has terminated all collection
45 activities in accordance with subparagraph (ii) of paragraph (b) of this
46 subdivision.
47 § 604-dd. Exceptions. 1. The provisions of this article shall not be
48 construed so as to prevent a creditor from enforcing any claim or
49 collecting judgment arising out of lawful debt or portion thereof from
50 any other person or entity other than the coerced debtor.
51 2. The private right of action authorized by this section shall not
52 apply to any debt secured by real property nor shall it apply to any
53 action to enforce a lien of personal property pursuant to article nine
54 of the lien law.
55 § 2. This act shall take effect on the ninetieth day after it shall
56 have become a law.
