Creditors would stop collecting documented debt caused by abuse

Creditors would stop collecting documented coerced debt, return payments, and ask credit reporting agencies to delete related information. Relief would cover debt caused by pressure, deception, or misuse of personal information in cases involving trafficking, domestic abuse or violence, sexual assault, stalking, or adult abuse. Debt backed by real estate would be excluded. People seeking relief would submit a signed statement on the required state form, identify the debt, explain what happened, and provide supporting documents. Documents could include messages or verification from a qualified helper, such as a licensed counselor. Creditors could not require police or court records. Creditors could keep an existing collection lawsuit open to challenge whether the debt was coerced. They could not sell the debt or transfer it for payment. Within ten business days of receiving the required statement and documents, creditors would stop collection and court-ordered deductions from pay or accounts, refund payments, and request deletion of credit information.

Creditors would explain how to report coerced debt and protect the person's contact details, statement, and supporting information. Lenders, debt collectors, debt buyers, and others claiming a debt would give submission instructions in collection letters, written communications, and on their websites. Debt backed by real estate would be excluded. Written notices would be in English and Spanish. Creditors offering interpretation or communicating in another language would also provide the required notice in the person's preferred language. Creditors would use only the contact information in the statement. They could summarize allegations to collect from the person accused of causing the debt, but could not share the statement, contact details, or supporting information. Creditors would report credit disputes within ten business days of receiving a statement and explain missing information within fourteen business days of an incomplete claim. The state's Financial Institutions Division would publish an English and Spanish model form within 180 days of the act taking effect.

People could defend against coerced debt claims and seek damages for creditors' rule violations. People found responsible for causing coerced debt would owe the creditor. These rules would cover lawsuits filed in New Mexico even if a contract chooses another state's law, but would exclude debt backed by real estate. People causing coerced debt could also owe the affected person repayment of related payments or costs. A creditor with a good-faith reason to challenge a complete statement could seek a court ruling, but would have to prove the debt was not coerced. Creditors violating collection, notice, or privacy duties could owe actual losses, court costs, and reasonable lawyer fees. Courts could award individuals up to $5,000 per violation, adjusted annually for inflation, and extra punishment damages for willful violations. For unnamed members of a group lawsuit, damages would be capped at the smaller of $500,000, adjusted annually for inflation, or 1% of the debt collector's net worth. Courts would protect people and their immediate families by sealing records, hiding identifying information, and using remote testimony. People could not sign away the act's rights.