New York Amends Recently Enacted Law Prohibiting the Collection of Coerced Debt

New York has amended a law enacted last December prohibiting creditors from collecting a “coerced debt.” The amendments narrow the scope of the law and also extend the effective date to June 17, 2026.

In December 2025, New York enacted a law prohibiting creditors from collecting a “coerced debt,” which was defined as a consumer debt incurred as a result of economic abuse, including but not limited to, by means of fraud, duress, intimidation, threat, force, coercion, manipulation, undue influence, or the non-consensual use of the debtor’s personal information. The law was designed to protect survivors of domestic violence and others who have become victims of economic abuse. The new law was set forth in General Business Law Article 29-HHH and was to take effect on March 19, 2026. We addressed the law in a prior Advisory.

The amendments are set forth in a chapter amendment (“Chapter Amendment”) signed by Governor Hochul on March 18, 2026. The Chapter Amendment narrows the scope of the law by replacing the broad “economic abuse” framework with a more targeted definition of “coerced debt”, excluding debts secured by real property entirely, and introduces several creditor-friendly procedural protections. The Chapter Amendment also revises the litigation prerequisites by requiring debtors to seek reconsideration before filing suit, extends the effective date from 90 to 180 days, and makes the law applicable only prospectively to debts incurred on or after the effective date.

The Chapter Amendment takes effect on June 17, 2026.

I. Revised Definitions

“Coerced Debt”

The Chapter Amendment substantially revises the definition of "coerced debt." Under the original law, a coerced debt was broadly defined as a debt incurred as a result of economic abuse, including but not limited to, by means of fraud, duress, intimidation, threat, force, coercion, manipulation, or undue influence, the non-consensual use of the debtor’s personal information.

The Chapter Amendment eliminates the concept of "economic abuse" and replaces it with a more targeted definition. "Coerced debt" now means a debt arising out of a transaction primarily for personal, family, or household purposes that was incurred because of duress, intimidation, threat, force, coercion, manipulation, or undue influence within the context of intimate relationships or relationships between family or household members, relationships between victims of human trafficking and traffickers, and relationships between children and their parents or caretakers, the elderly or individuals eligible for protective services and their caregivers. Notably, the amended definition no longer includes "fraud" or the "non-consensual use of the debtor's personal information" as independent bases for establishing a coerced debt.

II. Changes to Adequate Documentation

The Chapter Amendment makes two notable changes to the types of documentation a debtor may submit to support a claim of coerced debt. First, the option to submit a "federal trade commission identity theft report" has been replaced with the option to submit a copy of an official, valid report filed by the debtor with a federal, state, or local law enforcement agency, the filing of which subjects the person filing the report to criminal penalties relating to the filing of false information. Second, a written verification from a qualified third party must now have been provided while the qualified third party was "acting in their professional capacity."

III. Notice Process and Creditor Review

Timing to Stop Collection Activities

Under the original law, a creditor was required to cease collection activities “upon receipt" of the debtor's adequate documentation and sworn statement. The Chapter Amendment now gives the creditor 10 business days from receipt of the required documentation to cease collection activities.

Sworn Statement Under Penalty of Law

The model notice language has been amended to require that the debtor's sworn statement be made "under penalty of perjury."

Disclosure Exception for Actions Against the Coercer

The original law prohibited creditors from disclosing the debtor's documentation or contact information to any third party, including joint accountholders, without the debtor's written consent. The Chapter Amendment carves out an exception permitting disclosure as reasonably necessary for a creditor to bring and maintain an action against the person who caused the coerced debt, provided that under no circumstance may the creditor disclose the debtor's contact information unless directed by a court, and such court shall only direct disclosure in a manner reasonably calculated to protect the safety of the debtor.

Documents Required Upon Recommencement

The original law required a creditor recommencing collection activities to enclose all documents and information upon which it based its determination. The Chapter Amendment removes this requirement.

Reconsideration

The Chapter Amendment adds that any further reconsideration of the creditor's determination beyond the initial request shall be at the discretion of the creditor. It also clarifies that submitting a request for reconsideration to the creditor shall not be a condition to bringing an action under the coerced debt cause of action.

Statute of Limitations Tolling

The original law provided that ceasing collection activities would not toll the statute of limitations on any action to collect the debt. This provision has been removed.

IV. 15-Day Cure Period for Procedural Violations

The Chapter Amendment introduces a new cure mechanism for creditors found to have violated the notice and review procedures. Under the amended law, if a debtor notifies the creditor of a violation, the creditor has 15 days to cure. Only if the violation is not cured within that 15-day period, and such inability to cure is not the result of a bona fide error, may the debtor bring a cause of action for statutory damages of $1,000, actual damages, and reasonable costs and attorneys' fees.

The Chapter Amendment also clarifies that "collection activities" for purposes of the notice provisions do not include any communication between a creditor and debtor that is required by state or federal law or regulation.

V. Changes to the Coerced Debt Cause of Action

The original law permitted a debtor to bring a cause of action for a declaratory judgment once the debtor had sent the notice of coerced debt and either: (a) the 30-day review period had expired without written notice that collection had ceased, or (b) the debtor had received a written determination that the debt was not coerced. The Chapter Amendment replaces these prerequisites with a new requirement: the debtor must have submitted a request for reconsideration and the creditor must have either affirmed its determination that the debt is not coerced or the debtor must not have received written notice that the creditor determined the debt to be coerced within 35 days of submitting the request.

The Chapter Amendment also adds a new defense for creditors. A debtor who establishes by a preponderance of the evidence that a debt is coerced is entitled to relief "unless the creditor provides information that would otherwise show that the determination that the debt was not coerced was the result of the creditor's bona fide error."

Lastly, under the original law, a debtor who prevailed on an affirmative defense of coerced debt was entitled to costs and attorneys' fees. The Chapter Amendment removes this provision.

VI. New Treatment of Secured Debt

The Chapter Amendment expands the treatment of secured debt by creating a standalone section (new Section 604-dd). Under the amended law, the statute does not apply at all to debts secured by real property, except for the right of action against the person who caused the coerced debt (new Section 604-ee). For debts secured by personal property, the notice process under Section 604-bb and the debtor's cause of action under Section 604-cc do not apply.

VII. Right of Action Against the Coercer

The provision creating a right of action against the person who caused another to incur a coerced debt has been moved from Section 604-cc to a new standalone section, Section 604-ee. The substance remains largely the same, but the amended provision now expressly states that the coercer's liability includes liability for any deficiency after the foreclosure, repossession, or surrender and disposition of the subject collateral of a secured debt.

VIII. Attorney General Enforcement

The Attorney General enforcement provisions have been moved to a new standalone section, Section 604-ff. The Chapter Amendment increases the minimum notice period to the defendant from five days to 15 days. Additionally, the court may only impose civil penalties of up to $5,000 per violation "unless the creditor has provided information that would otherwise show the violation was the result of bona fide error."

IX. Conclusion

A copy of the revised law can be found here. Financial institutions and other lenders operating in New York should update their procedures to reflect these changes, including the revised definitions, modified notice and review timelines, and the new treatment of secured debt under the changes made by the Chapter Amendment.

If you have any questions about the Chapter Amendment, please feel free to contact Joseph D. Simon at (516) 357-3710 or via email at jsimon@cullenllp.com, Elizabeth A. Murphy at (516) 296-9154, or via email at emurphy@cullenllp.com, David Curatolo at (516) 357-3773 or via email at dcuratolo@cullenllp.com, or Gabriela Morales at (516) 357-3850 or via email at gmorales@cullenllp.com.

Please note that this is a general overview of developments in the law and does not constitute legal advice. Nothing herein creates an attorney-client relationship between the sender and recipient.