Abuse by Credit: The Problem of Coerced Debt in Texas

istock85963-1544735973-13.jpg

Introduction

Acknowledgements 

This report would not have been possible without contributions from the following experts:

  • Angela Littwin, Ronald D. Krist Professor of Law, University of Texas, Austin*
  • Krista DelGallo & Mona Muro, Texas Council on Family Violence
  • Carla Sanchez-Adams, Attorney, Board Certified in Consumer and Commercial law*

*views expressed are those of the contributors and not those of their affiliate institutions.

One in three adult Texans has experienced family violence.  In 2016, Texas family violence programs received 172,573 hotline calls, and in the following year, 136 Texas women were killed by intimate partners. 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, control that entails a pattern of taking away a victim’s sense of self and freedom and that further entraps victims. One form of economic abuse is coerced debt: non-consensual debt incurred by an abuser in an abusive relationship. This coerced debt . Consumer 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.

Economic security is critical for survivors of domestic violence to break free from an abusive partner. Research shows that A primary reason women remain in abusive relationships is a lack of financial resources. 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. Survivors of domestic violence need tools to regain economic stability.

Meredith’s Story

When Meredith [name has been changed], a survivor of domestic violence, was married, her husband hid their financial information. A few times, Meredith heard him joke about her to his friends, saying, “I keep her around for her good credit.” After their divorce, she realized, to her horror, how true his statement had been. Her husband had run up thousands of dollars of credit card debt in her name. When her consumer report arrived in the mail, it was 1 ½ inches thick—this, for a person who had never even used a credit card before and was fastidious about saving her money. Meredith, newly divorced and trying to enroll in college, was faced with the prospect of owing an inconceivable amount of money. It was a big challenge to undo the damage to her credit and her financial life. As Meredith noted, “I went through hell.”

The Problem of Coerced Debt

The most recent major national survey of domestic violence found that at some point in their lives. Of the relationships where domestic violence was present, economic abuse occurred in 94 to 99 percent of them.

These statistics, along with the statistics from the 2007 Consumer Bankruptcy Project, speak to the connection between domestic violence and economic vulnerability. , 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.

In a , 93 percent of domestic violence professionals reported having clients who experienced coerced debt. These domestic violence advocates on the impacts of coerced debt:

  • Bad credit “really impacts [my client’s] ability to stay safe.”   
  • Removing negative DV-related incidents from a client’s consumer report is “near impossible.”
  • “There needs to be some kind of way to rehabilitate credit.”
  • “Advancing measures that are beneficial for combating identity theft generally would have [a] huge benefit for combating domestic violence.”
  • “For the majority of the survivors in this country, they are the ones who ultimately bear the economic burden of the abuse.”
  • “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.”
  • “The relationship devastates them not only physically and emotionally, but also financially.”
  • “Part of the battering was complete control of the finances.”

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

What is Coerced Debt?

Coerced debt happens when abusers use debt to control and harm their partners. Coerced debt is , credit-related transactions that occur in intimate relationships where In almost all cases of coerced debt, the . Because of the importance of credit in securing housing, employment, utilities, and loans, for domestic violence survivors to leave abusers and to build economic independence and resilience.

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 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.”

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. These numbers hint at how widespread 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 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 . 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.

Who is Affected by Coerced Debt?

Because of entrenched cultural shame and stigma associated with the topics of debt and domestic violence, coerced debt is rarely discussed in public. The topic of coerced debt is slowly gaining public attention as a result of recent studies and through tennis superstar Serena Williams, who declared it her personal mission to bring attention to the subject of economic abuse.

In a designed to better quantify the impacts of coerced debt on survivors of domestic violence, 52 percent of callers to the National Domestic Violence Hotline who participated in the survey reported coerced debt. 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. Fraudulent transactions occur without the knowledge or consent of the victim, whereas with coerced transactions, the victim may know about the transaction and give coerced consent out of fear of harm.  Of callers who reported that they had experienced coerced debt, 17 percent said that the coerced debt resulted from 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 the coerced debt included both fraud and other coercive debt, while 55 percent, the majority of coerced debt victims, where consent was given  due to fear of harmful consequences.

Rates of Coercive and Fraudulent Debt

Texas-specific statistics from the National Domestic Violence Hotline from January to December of 2017 show that among callers, 27 percent self-articulated economic or financial abuse. That number increased to 30 percent in the first half of 2018. The Texas and national data, taken together, show that coerced debt is a problem impacting a substantial subset of domestic violence survivors.  

How Coerced Debt Comes About

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 , using knowledge of a partner’s personal identifying information to open the account. 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 .

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. that abusers commonly used when threatening victims to comply with a command. Physical consequences include “threats of bodily harm.” Psychological consequences include “threats of emotionally distressing actions,” such as name calling, threats to reveal personal or embarrassing information, yelling and screaming, or threatening to end the relationship. And finally, economic consequences include “threats of the loss of financial and material resources.”

Types of Threats Used in Coercive Debt Transactions

The following scenarios capture some of the ways that coerced debt has been generated. 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 uses physical duress to force a partner to apply for a credit card. Sylvia and Carlos were married with two children. Carlos frequently hit and belittled Sylvia. When a credit card offer came in the mail in Sylvia’s name, Carlos told her that she needed to sign to accept the offer and give him the card or he would hurt her. Sylvia 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 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 leave David. When Alicia tried to apply for a job, her application was denied after the employer conducted a background screening that included credit information. She looked at her consumer report online, and found out that there was over $30,000 in credit card debt in her name.
  • An abusive partner uses a partner’s identity to obtain a car loan. James and Maria were dating. When Maria was away visiting her family, James brought his sister to the car dealership with him. His sister pretended to be Maria, and signed a loan for a new car that James drove. James 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”, 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 and her economic security, leaving her vulnerable to homelessness.   

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 and intimidate. Sylvia and Melanie, who were coerced to authorize debt, have no protections under current law. Under current Texas law, it is unlikely that Sylvia and Melanie qualify as victims of identity theft.  They are thus and are held responsible for the debt incurred by coercion. Yet, as all the stories show, individuals who have experienced coerced debt need strong legal supports to help them leave abusive relationships and regain their financial footing.

Coerced Debt in the Broader Credit Sphere

Texans are increasingly concerned that consumer reports incorrectly reflect a consumer’s risk profile. In 2017, the news of the Equifax data breach was made public. This breach impacted 143 million individuals nationwide and 12 million Texans, close to half of the US and Texas populations. The scandal brought new Congressional oversight to Equifax and the other Consumer Reporting Agencies (CRAs), and it increased the concern by ordinary Americans over the privacy of their data. 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 consumer reporting complaints from 2015 through mid-2018, with an increase in consumer reporting complaints from 2016 to 2017. Incorrect information made up 64 percent of all complaints received. Texas data show similar trends, with more than 28,000 complaints received by the CFPB over the same period and an even steeper increase in consumer reporting complaints from 2016 to 2017. In 2017, consumer reporting complaints made up 36 percent of all Texas complaints compared to 31 percent nationwide. The CFPB has taken several corrective measures in response to consumer complaints about the consumer reporting agencies, like fixing data accuracy and repairing broken dispute processes. However, the CFPB has declined to fully investigate the Equifax data breach.

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

The (FCRA) provides relief for a person when debt is reported inaccurately due to identity theft. In reality, however, for a person who is the victim of coerced debt to have this information blocked from a consumer report. If a domestic violence survivor has coerced debt that did not result from fraud, but rather coercion, such as with Sylvia profiled above, the survivor will not fit the usual scenario of a victim of identity theft.

A common assumption is that identity theft happens when a stranger—not an intimate partner—steals someone’s financial information. Among survivors and the public at large, it is also widely held that “” Alicia, profiled above, though clearly a victim of identity theft, may not be able to get a police report because she was married to her abuser at the time of identity theft crime.

Addressing Coerced Debt

There is a need to utilize more effectively the tools available to victims of coerced debt so that they 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 utilize final protective orders under the Texas Family Code—protective orders designed to protect survivors of abuse—to support not only the physical security, but also the economic security, of survivors 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. available to all victims is to add a 100 word personal statement to their consumer report. However, these statements do not alter the information in the consumer report itself. Even if a victim has added a statement explaining accounts in the report are coerced, the consumer report still factors in information from the 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.

Victims of coerced debt need clearer pathways to block coerced debt from being visible to potential creditors. In 2003, Congress passed the , an amendment to the Fair Credit Reporting Act (FCRA). FACTA relies on law enforcement agencies to screen claims of identity theft. This law provides victims of identity theft who have documentation, most typically a police report, access to a series of useful protections that aim to ameliorate the negative consequences of credit damage. allow victims of identity theft to:

(a) place a fraud alert on their consumer reports by making a single telephone call to any of the three credit bureaus;

(b) place a 7-year fraud alert on their consumer reports by providing a written request accompanied by an identity theft report;

(c) get a free copy of their consumer 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 consumer 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 consumer reports;

(g) place a credit freeze; and

(h) obtain copies of records related to identity theft.

Currently, some victims of coerced debt, such as Sylvia 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 . A change in the law that clarifies that identity theft happens when there is a lack of effective consent would expand options for a victim of coerced debt to be declared a victim of identity theft under federal laws.

If coerced debt victims 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 survivors of domestic violence in Texas. For example, in the case of Sylvia, described above, a change to the Texas Penal Code definition of identity theft to include lack of effective consent, would enable her to successfully file a police report for . She could then use this identity theft report to access the protections under FACTA. One of these protections could be that the coerced debt is blocked from her consumer report.

With an accurate report reflecting Sylvia’s true credit risk, she can better work towards building economic stability.     

2. Protective orders should ensure the economic security of survivors.

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, that family violence has occurred and is likely to occur in the future. A 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:

  • Requiring the respondent to turn over certain important identification and financial documents;
  • Ordering the abuser to refrain from accruing any new debts; and
  • Including an allocation of funds to previously accrued in the case of unmarried individuals.

When a protective order protects economic security, a domestic violence survivor is safer, better positioned to be financially independent, and less likely to return to an abusive partner.

Protective orders that address economic security would make a positive impact in the lives of victims of coerced debt. For example, Alicia, the survivor profiled above, could receive a protective order against her ex-boyfriend with specific provisions relating to her financial security and protection.  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, which 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.

Conclusion

Coerced debt is a major barrier to the economic independence and well-being of survivors of domestic violence. The importance of good credit for securing the basic necessities of life makes addressing this problem a priority. Federal and state governments have a number of specific and practical steps they might take 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 judges to include, in protective orders, appropriate provisions 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.

%d bloggers like this: