Abuse by Credit: The Problem of Coerced Debt in Texas

A report by Texas Appleseed

One in three adult Texans has experienced domestic violence in their lifetime.¹ In 2016, Texas family violence programs received 172,573 hotline calls, and in the following year, 136 Texas women were killed by intimate partners.² Though domestic violence is commonly characterized by physical and emotional abuse, economic abuse has gained increasing recognition as a prevalent and serious mechanism of coercive control that further entraps victims. One form of economic abuse is coerced debt: non-consensual debt incurred by an abuser in an abusive relationship.³ This abuse disrupts survivors’ ability to move forward with their lives, provide for their families and stifles their independence.⁴ Credit reports play a growing role in our financial lives—involving everything from employment to housing to car loans—and bad credit too often means poor financial options for survivors of domestic abuse. In the first six months of 2018, nearly one in three Texans who called the National Domestic Violence Hotline reported economic or financial abuse.⁵

Economic security is critical for survivors of domestic violence to break free from an abusive partner. Research shows that “access to economic resources is the most likely predictor of whether a survivor will be able to permanently separate from their abusive partner.”⁶ A primary reason women remain in abusive relationships is a lack of financial resources.⁷ A 2014 study based on callers to the National Domestic Violence Hotline suggested that 73 percent of callers stayed longer in a relationship with someone who was controlling because of concerns about financially supporting themselves or their children.⁸ Survivors of domestic violence need to be equipped with tools to regain economic stability.

The most recent, major national survey of domestic violence found that 35.6 percent of women in the general U.S. population had experienced domestic violence at some point in their lives.⁹ Of the relationships where domestic violence was present, financial abuse occurred in 94 to 99 percent of them.¹⁰

These statistics, along with the statistics from the 2007 Consumer Bankruptcy Project, speak to the connection between domestic violence and economic vulnerability. According to the Project, 17.8 percent of females who were married or living with a partner at the time of bankruptcy filing had experienced domestic violence in the year before bankruptcy.¹¹ In comparison, the national domestic abuse rate among women in any one year ranges from 1.5 to 9.8 percent.¹² The discrepancy between these two sets of statistics reveals the economic damage caused by domestic violence.

In a 2012 study focused on coerced debt, 93 percent of domestic violence professionals reported having clients who experienced coerced debt.¹³ These domestic violence advocates shed light on the impacts of coerced debt:

• Bad credit “really impacts [my client’s] ability to stay safe.”¹⁴
• Removing negative DV-related incidents from a client’s credit report is “near impossible.”¹⁵
• “There needs to be some kind of way to rehabilitate credit.”¹⁶
• “Advancing measures that are beneficial for combating identity theft generally would have [a] huge benefit for combating domestic violence.”¹⁷
• “For the majority of the survivors in this country, they are the ones who ultimately bear the economic burden of the abuse.”¹⁸
• “Long after the bruises have healed, and they’ve dealt with the emotional part, they’re still trying to put their financial house back in order.”¹⁹
• “The relationship devastates them not only physically and emotionally, but also financially.”²⁰
• “Part of the battering was complete control of the finances.”²¹

Their testimony speaks for itself. Coerced debt is a significant problem with serious implications for survivors of domestic violence.

Coerced debt happens when abusers use debt to control and harm their partners. Coerced debt is non-consensual,²² credit-related transactions that occur in intimate relationships where one partner uses coercive control to dominate the other.²³ In almost all cases of coerced debt, the survivor’s credit score may be negatively impacted.²⁴ Because of the importance of credit scores in securing housing, employment, utilities, and loans, coerced debt can make it nearly impossible for domestic violence survivors to leave abusers and to build economic independence and resilience.²⁵

Coerced debt is identity theft that occurs within relationships. Physical assault that occurs against a partner is illegal in the same way as physical assault that occurs among strangers. Identity theft that occurs within relationships (i.e., coerced debt) should be recognized as the illegal activity it is in the same way as identity theft that occurs among strangers.

Coerced debt also falls into the broader category of economic abuse. While traditional economic abuse encompasses actions by abusive partners like stealing cash and interfering with a victim’s ability to work, in other cases, economic abuse is when an abuser “separates the victim from their own resources, rights and choices, isolating the victim financially and creating a forced dependency for the victim.”²⁶

Coerced Debt: The Intersection of Economic Abuse and Identity Theft

In the first six months of 2018 alone, the National Domestic Violence Hotline documented 9,867 phone calls or online chat contacts from Texans experiencing domestic violence. Of these callers, 30 percent reported economic or financial abuse.²⁷ These numbers hint at how widespread a problem coerced debt is for vulnerable Texans.

The motivations of abusers using tactics of economic abuse vary. The most obvious reason why abusers create debt for a partner without the partner’s consent or effective consent is for their own economic gain. For an abuser, incurring coerced debt in the name of a victim can be a simple and direct way of gaining access to financial resources. However, research on coerced debt suggests that an equally compelling motivation is control.²⁸ Whether as part of a larger structure of coercive control or as a deliberate way of rendering a victim unable to leave a relationship, coerced debt plays a significant role in relationships characterized by domestic violence.

Because of entrenched cultural shame and stigma associated with the topics of debt and domestic violence, coerced debt is rarely discussed in public. Recent studies, as well as public attention to the issue by tennis superstar Serena Williams, who declared it her personal mission to bring attention to the subject, is slowly raising awareness of coerced debt.²⁹

In 2014, 52 percent of callers to the National Domestic Violence Hotline who participated in a survey designed to better quantify the impacts of coerced debt on victims of domestic violence reported coerced debt.³⁰ When asked directly about coerced debt, over half the survey participants reported that they had partners who generated debt in their names via coercive or fraudulent transactions. Of callers who reported that they had experienced coerced debt, 17 percent said that they had coerced debt in the form of fraudulent transactions only—transactions where the victim did not consent to the debts at the time they were incurred. Twenty-eight percent of these callers said that they had coerced debt that included both fraud and other coercive debt transactions, while 55 percent, the majority of coerced debt victims, experienced other coercive debt transactions without explicit fraud, where the victim gave coerced consent to the debts due to fear of harmful consequences.³¹

Rates of Coercive and Fraudulent Debt
For 2014 National Domestic Violence Hotline Survey Participants with Coerced Debt

Texas-specific statistics from the National Domestic Violence Hotline in 2017 show that among callers, 27 percent self-articulated economic or financial abuse.³² The Texas and national data, taken together, show that coerced debt is a problem impacting a substantial subset of domestic violence victims.

There is no singular or formulaic way that coerced debt happens. In fact, the sheer number of ways that a domestic violence survivor can get saddled with coerced debt is staggering. One of the simpler scenarios is when an abusive partner obtains a credit card in a partner’s name online, using knowledge of a partner’s personal identifying information to open the account.³³ The abusive partner can either incur the debt without the victim’s knowledge — an explicitly fraudulent transaction — or can coerce the victim into incurring the debt — a coercive transaction.

For fraudulent transactions, once debt has been incurred in the name of a domestic violence victim, it can be some time before the victim finds out about the debt. The majority of callers to the National Domestic Violence Hotline who reported explicitly fraudulent coerced debt reported that they learned of the debt only through creditor or bill collector-initiated contact.³⁴ Once a debt is overdue, the victim’s credit has already been impacted.

The same study suggests that for coercive debt transactions, where the victim gives coerced consent to debts, abusive partners used threats of harm to coerce their partners into incurring debt. The study distinguished between three types of consequences that abusers commonly used when threatening victims to comply with a command. Physical consequences include “threats of bodily harm to [the] victim or victim’s loved ones.” Psychological consequences include “threats of emotionally distressing actions,” such as name calling, yelling and screaming, or threatening to end the relationship. And finally, economic consequences include “threats of the loss of financial and material resources.”³⁵

Types of Threats Used in Coercive Debt Transactions
2014 National Domestic Violence Hotline Survey Participants with Coerced Debt

The following scenarios capture some of the ways that coerced debt has been generated.³⁶ While the scenarios are all based on the stories of actual people, all names and identifying details have been changed to protect the privacy of individuals.

• An abusive partner applies for and uses credit cards in a partner’s name without the partner’s knowledge. David and Alicia were dating for two years. During that time, David secretly opened up credit cards in Alicia’s name online, and maxed out several of the cards. He always checked the mail and never let Alicia know about any financial matters. Alicia finally decided to separate from David. When Alicia tried to apply for a job, her application was denied after the employer ran a credit check. She looked at her credit report online, and found out that there was over $30,000 in credit card debt in her name.
• An abusive partner uses physical duress to force a partner to apply for a credit card. Yesenia and Carlos were married with two children. Carlos frequently hit and belittled Yesenia. When a credit card offer came in the mail in Yesenia’s name, Carlos told her that she needed to sign to accept the offer and give him the card or he would hurt her. Yesenia felt she had no other option but to sign and give the card to Carlos, as she was scared he would hurt her or her kids.

• An abusive partner uses a partner’s identity to obtain a car loan. Jaime and Maria were dating. When Maria was away visiting her family, Jaime brought his sister to the car dealership with him. His sister pretended to be Maria, and signed a loan for a new car that Jaime drove. Jaime did not make the payments, and a collections company started calling Maria about missed payments. As a result of the missed car payments, Maria’s credit score plummeted.
• An abusive partner forges a partner’s signature on a home mortgage document to withdraw equity from a family home. Stephen and Melanie were married for 30 years, during which time Stephen was frequently abusive. Stephen forced Melanie to sign a home mortgage document and withdrew equity from the family home. He told her that she was “stupid” and that he knew what he was doing, and that Melanie should do what he told her, or he would hurt her. Because of his history of abuse, Melanie did what he forced her to do, and signed the documents. Later the bank foreclosed on the house, severely damaging Melanie’s credit.

These stories are all different, yet they are united by the common thread that they each These stories are all different, yet they are united by the common thread that they each feature coerced debt—non-consensual debt that arose in the context of a relationship where coercive control was used to dominate. For Yesenia and Melanie, who technically authorized the debt, but only because they were coerced into doing so, the law fails to protect them. Under Texas law, as it is currently written, it is not clear that they qualify as victims of identity theft with any recourse from being held responsible for the debt incurred by coercion.³⁷ And, as all the stories show, individuals who have experienced coerced debt need strong legal supports to help them regain their financial footing.

Texans are increasingly concerned that credit reports incorrectly reflect a consumer’s risk profile. Just last year, the news of the Equifax data breach was made public. This breach impacted 143 million consumers nationwide and 12 million Texans.³⁸ The scandal brought new Congressional oversight to Equifax and the other Credit Reporting Agencies (CRAs), and it increased the concern by ordinary Americans over the privacy of their data.³⁹ Reflective of that concern is the high level of complaints received by oversight agencies. For example, the Consumer Financial Protection Bureau (CFPB) handled approximately 274,000 credit reporting complaints from 2015 through mid-2018, with an increase in credit reporting complaints from 2016 to 2017.⁴⁰ Incorrect information made up 64 percent of all complaints received.⁴¹ Texas data show similar trends, with more than 28,000 complaints received by the CFPB over the same time period and an even steeper increase in credit reporting complaints from 2016 to 2017.⁴² In 2017, credit reporting complaints made up 36 percent of all Texas complaints compared to 31 percent nationwide.⁴³ The CFPB has taken several corrective measures in response to consumer complaints about the credit reporting agencies, like fixing data accuracy and repairing broken dispute processes.⁴⁴ However, the CFPB has declined to fully investigate the Equifax data breach.⁴⁵

Coerced debt, just like identity theft caused by data breaches, often leads to a credit report that does not accurately reflect an individual’s true risk profile. An inaccurate credit report can force people needing credit into exorbitantly priced subprime credit options, despite being credit-worthy, and create barriers to renting apartments and finding a job.

The Fair Credit Reporting Act (FCRA) states that a person is not responsible for debts incurred by someone who used the person’s identifying information without explicit permission. Though the law is clear, in reality it is very difficult for a person who is the victim of coerced debt to have this information blocked from a credit report.⁴⁶ For example, if a domestic violence victim has debt that was coerced, such as with Yesenia profiled above, the domestic violence victim does not fit the usual scenario of a victim of identity theft. To many people, identity theft happens when a stranger—not an intimate partner—steals someone’s financial information. Among survivors and the public at large, it is a common false assumption that “an identity theft victim is responsible for repaying debts when the identity theft is his or her spouse.”⁴⁷ Yesenia may not be able to get a police report and an identity theft affidavit if she was coerced to authorize a debt due to fear of abusive consequences.

There is need to expand the tools available to survivors of coerced debt so that survivors may more easily regain economic security. Two important approaches to address the problem of coerced debt are to clarify that coerced debt falls clearly under identity theft and to use protections in civil protective orders — protective orders designed to protect victims of abuse — to support not only the physical security, but also the economic security, of victims of domestic violence.

1. Coerced debt is a form of identity theft and victims should receive the same protections.

It is exceedingly difficult for people who have experienced coerced debt to remove this debt from their credit history. One free option available to all victims is to add a personal statement to their credit report.⁴⁸ However, personal statements do not alter the information in the credit report itself. Even if the victim has filed a personal statement in a credit report explaining which aspects of the report are coerced, the credit score will still reflect information from coerced accounts. Creditors might disregard the personal statement altogether and may deny credit on the basis of account information that is reflective of domestic abuse rather than the true credit worthiness of a survivor of domestic violence.

Survivors of coerced debt need stronger protections that block the coerced debt from being visible to potential creditors. In 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACTA), an amendment to the Fair Credit Reporting Act (FCRA).⁴⁹ FACTA relies on law enforcement agencies to screen claims of identity theft. This law provides victims of identity theft access to a series of useful protections that have the aim of repairing credit. These protections allow victims of identity theft to:

(a) place a fraud alert on their credit reports by making a single telephone call to any of the three credit bureaus;
(b) place a 7 year fraud alert on their credit reports by providing a written request accompanied by an identity theft report;
(c) get a free copy of their credit reports annually from each of the three credit bureaus or two free copies annually when the consumer places an extended fraud alert;
(d) block fraudulent information from their credit reports and be notified if a block is declined or rescinded;
(e) stop creditors and debt collectors from reporting fraudulent accounts to credit bureaus;
(f) dispute fraudulent or inaccurate items on their credit reports;
(g) place a credit freeze; and
(h) obtain copies of records related to identity theft.⁵⁰

Currently, some victims of coerced debt — such as Yesenia and Melanie, described above, who complied with their abusers’ demands for fear of physical harm — cannot easily access these federal protections. In order to invoke the protections under FACTA, victims need to have filed a police report. If a victim does not meet the criminal definition of identity theft because of grey areas in the law, then the victim will have difficulty securing a police report.⁵¹ A change in the law that clarifies that identity theft happens when there is a lack of effective consent would allow a victim of coerced debt to be declared a victim of identity theft under federal laws.

If coerced debt survivors were able to claim the legal protections given to other victims of identity theft, it would make a specific and meaningful difference in the lives of domestic violence survivors in Texas. For example, in the case of Yesenia, described above, this change to the Texas Penal Code would enable her to successfully file a police report for identity theft. She could then use this identity theft report and an identity theft affidavit to access the protections under FACTA. One of these protections could be that the coerced debt is blocked from her credit report.

With a positive credit report, which now correctly reflects Yesenia’s true credit risk, Yesenia is in a more secure economic position to rebuild her life.

2. Civil protective orders should ensure the economic security of survivors.

Civil protective orders under the Texas Family Code were designed to promote greater safety for domestic violence survivors and other protected parties such as their children. In order to receive a civil protective order, a judge must find that family violence has occurred by the respondent of the protective order towards the applicant of the protective order and is likely to occur in the future.⁵² A civil protective order generally includes a finding of family violence and lists specific protections, which vary depending on the situation and what the judge is willing to include in the order.

Texas law does not include explicit provisions related to economic security, but it allows judges the discretion to include economic security provisions in civil protective orders. Economic security protections could include features, such as:

• Turning over the identification and financial documents of the victim of family violence;
• Ordering the abuser to refrain from accruing any new debts; and
• In the case of unmarried individuals, including restitution for debts previously accrued.⁵³

When a civil protective order protects economic security, a domestic violence survivor is better able to be safe and financially independent.

Civil protective orders that address economic security would make a positive impact in the lives of victims of coerced debt. They would allow a survivor like Alicia, profiled above, to receive a protective order against her ex-boyfriend that helps her attain economic security. This order could include a directive that David may no longer incur any new debts on the credit cards he has opened in Alicia’s name. The protective order could also state that David must give Alicia her birth certificate and social security card that he had kept hidden from her. Taken together, these provisions could go far towards equipping Alicia with the tools to regain her economic — as well as physical — security.

Coerced debt is a major barrier to the economic independence and well-being of survivors of domestic violence. The importance of a credit score for securing the basic necessities of life makes addressing this problem a priority. There are many different tactics that could be taken by federal and state governments to address coerced debt. One approach would be to make it easier for an individual who has experience coerced debt to access identity theft protections. Another approach would be to encourage the use of civil protective orders that directly address the economic security of survivors.

The increased prevalence of consumer debt and the increased use of the internet to obtain credit has given abusers new mechanisms by which they can exert coercive control over partners. Expanding tools to address coerced debt is key to the long-term economic well-being of survivors of domestic violence.