With the advent of technology, obtaining lines of credit has decreased in complexity and applications for credit can easily be submitted via mail, electronically, or by phone. This, coupled with an overall rise in the use of credit, has created new pathways for abusers to exploit victims financially. (Kim, 2015)
Coerced debt is a form of economic abuse affecting both married and unmarried couples, which involves “all nonconsensual, credit-related transactions that occur in a violent relationship, not just matters which depend on the express application of force.” (Littwin, 2012). This form of financial abuse can have devastating effects for victims, substantially limiting their economic self-sufficiency or preventing them from leaving an abusive relationship in the first place. (Postmus et al., 2012)
Estimating the prevalence of coerced debt within the context of domestic violence is difficult because few nationally representative studies have been conducted; however, one study by Rutgers University found that out of 120 women recruited from domestic violence programs, 79% had experienced economically exploitative behaviors such as building up debt under their name by doing things like using their credit card or running up the phone bill. (Kim, 2015) In another study from the University of Michigan, 58.8% of participants indicated that they were victim to economically exploitative behaviors. (Postmus, Plummer, McMahon, Murshid, & Kim, 2012)
Precursors to Coerced Debt
Various actions enable an abuser to gain financial control over a victim, and, therefore, allow them to more easily carry out coerced credit. These actions include (Littwin, 2012):
- Depriving access to family bank accounts
- Controlling any income the victim receives, including government benefits by taking away the check before it can be cashed or using direct deposit to secure the money
- Putting the victim on an allowance
- Withholding/hiding information about the family’s finances from the victim
FORMS OF COERCED DEBT (LITTWIN, 2012)
An abuser may carry out coerced debt using a variety of methods, including:
Coerced Debt Through Fraud:
- Forged signatures on credit card applications, documents for loans, etc.
- Nonconsensual use of personal information like social security numbers, bank account numbers, or dates of birth
- Filling out credit card offers that are intended for their partner
- Impersonation in person by family members who are the same gender as the victim
Coerced Debt Through Force:
- Forcing victims to sign financial documents against their will
- Use of threats to convince victims to sign financial documents
- Using physical force
- Using basic necessities as bargaining tools (e.g., “I won’t give you your allowance for food unless you sign this loan.”)
- Threatening to turn the victim in for immigration violations
Coerced Debt Through Misinformation:
- Having victims sign financial documents that they could not understand because they do not speak English, or not allowing victims to read the document
- Manipulating the victim to keep all of the debts in their name instead of the abusers with phrases like “I don’t have good credit, so let’s keep this in your name.”
- In married couples, the abuser borrowing in his own name knowing that the victim would also be liable for the debt
- Acquiring joint debt after the couple has separated, but before their divorce is finalized
- Placing utility debt under the victim’s name and then refusing to remove their name after they have left
Direct Coerced Debt:
- Stealing credit cards from the victim’s wallet
- Destroying property the victim had purchased via credit
- Depleting financial resources that the victim planned to use to pay off their debts and other bills
Coerced Secured Debt:
- Refinancing a home mortgage either through force or without permission from the victim
- Forcing the victim to take out home equity loans or taking out home equity loans without the victim’s permission
- Coercive title transfer, where the abuser places all of the assets in their own name and all of the debts in the victim’s name
- Using quitclaim deeds to transfer the victim’s ownership to the abuser without their knowledge or through force
- Filing for individual bankruptcy while the couple is still married in order to gain control over how assets are divided
- Refusing to make payments on the couple’s shared debt
- Refusal to pay off shared debt as a fear tactic
CONSEQUENCES OF COERCED DEBT
A majority of victims of coerced debt have no knowledge of the debts incurred in their name until they leave the abusive relationship. (Littwin, 2012) They may find out only when lawsuits are filed against them, they apply for housing or a line of credit, their wages are garnished, their bank accounts are frozen, or debt collectors attempt to contact them. (Littwin, 2012; Financial Abuse as a Form of Domestic Violence 2012)
What Is Credit and Why Is It Important?
An understanding of credit is necessary in order to grasp why coerced debt can be so devastating for victims. Credit is widely used as a way to measure someone’s ability to pay back a loan. For this reason, everyone from apartment owners, car dealerships and even employers use it to determine whether to provide you with their product or service. A person’s credit score is made up of many factors, some of which can be constantly changing:
- Payment history: How efficiently debt is paid off on credit cards.
- Accounts owed: Mainly proportion of amounts owed to total credit limits or original loan amount.
- Length of credit history: Time since the earliest account still in use has been opened.
- New credit: Number of recently opened accounts and number of recent credit inquiries. The more inquiries that are made, the more the credit score decreases.
- Types of credit used: Presence, prevalence and recent information on various types of accounts including installment loans, mortgage, credit card and retail accounts.
Coerced debt may affect victims’ credit scores negatively when:
- Debt is incurred and payments are not made on time or even at all because victims have no knowledge of the debt.
- Debt is accumulated by the abuser and the victim has no available funds to pay it back.
- Debt is made through multiple accounts the victim has ownership in.
- Especially for credit cards, if the debt is large but only the minimum payment is being made.
- New credit is constantly applied for without having a good payment history on existing credit.
- over 50% of allowed credit limit
- When making big purchases, having outside institutes like mortgage lenders checking credit scores can affect the score negatively. This is important if the abuser is making multiple large purchases and the victim’s name is used.
Direct Consequences of Coerced Debt (Littwin, 2015; Kim, 2015; Adams, Sullivan, Bybee, & Greeson, 2008)
The credit issues that emerge as a result of coerced debt may have severe consequences on a victim’s life and future economic self-sufficiency. Among these consequences are:
- Initial, financial barriers to leaving the abusive relationship
- Low credit scores resulting in an inability to obtain a job, housing, utilities, or insurance
- Inability to obtain credit cards, which can be a safety net to assist victims
- Burdening a survivor with economic obligations
- Removes the possibility of financial self-sufficiency
- Being forced to live in a shelter because the victim cannot obtain housing
- Removing credit issues caused by domestic violence is “nearly impossible”
IF YOU ARE A VICTIM OF COERCED DEBT
Because it can be dangerous to take precautions or stop accounts while in the relationship, there are more impactful steps that can be taken once the relationship has been ended. If you are a victim of coerced debt, take the following steps:
- Close or freeze all accounts that have been opened in the victim’s name by the abuser.
- Change all pin codes and passwords to accounts the victim may still want to use.
- Call financial institutes and ask if it is possible to use a verification system other than social security number, such as mother’s maiden name or date of birth. Sometimes it is possible to use voice verification as well.
- Change mailing address for victim’s mail. This way if the abuser has any offers or deals coming through in the victim’s name, it will be redirected to them. In addition, change email passwords and password recovery methods. This is important because with advancing technology, most statements or bills can be emailed to the account owner.
- Keep all documents in a safe location. Examples are of a third party location or a safety deposit box.
- Obtain free credit reports. There are three main reporting companies, and everyone is entitled to a free report once every 12 months. Notify the FTC of any discrepancies; however, statements must be 100 words or less.
PREVENTING COERCED DEBT
Below are steps a victim can take to protect themselves from the possibility of coerced debt:
- Education is the key to knowing the signs of financial abuse and coerced debt. Having knowledge on how the basic accounts operate and how debt is handled can be very helpful and provide security against the possibility of coerced debt occurring.
- Always keep a separate bank account that the partner does not have access to.
- Read through all credit reports and bank statements to make sure there are no discrepancies in payments or purchases. Contact the financial institution immediately if any are found.
- Keep checkbooks, credit cards and debit cards in a safe location.
CHALLENGES FOR THE LEGAL SYSTEM & THE CREDIT INDUSTRY
Within credit reporting bureaus, the legal system, and the credit industry, significant disparities exist which prevent victims of domestic violence from resolving or repairing the damage inflicted by coerced debt.
Coerced debt remains largely unaddressed by the credit industry and, therefore, may be handled in ways that could pose serious safety risks to victims of domestic violence. Updated protocols are required in order to adequately address coerced debt and provide sufficient support to its victims. Kim (2015) conducted a study to examine credit card companies’ responses to victims of domestic violence. Of the top 20 major creditors surveyed, none indicated that a policy or protocol was in place to handle cases where domestic violence was present. Victims are generally referred to a credit card company’s general policy regarding fraud and identity theft in cases of coerced debt through fraud. It was uncovered in this study that in cases of suspected fraud where an abuser opened a credit account without the victim’s knowledge, some credit card companies may file a police report without the victim’s permission. This could pose serious threats to safety for victims of domestic violence if charges are filed against their partners without their knowledge. In other cases, victims may be required to file a police report in order for the credit company to consider their case fraud. (Kim, 2015) According to Laura Russell, supervising attorney with the Legal Aid Society in New York, many times “companies are skeptical about claims of identity theft if you’re married.” (Ladika, 2012) This poses further challenges for victims of coerced debt who are currently married to their partner.
Credit Scores & Reporting
Negative credit incidents caused by coerced debt have been described by some lawyers who work with victims as “nearly impossible” to remove from a credit report. Due to the way credit reporting is arranged, removal of negative items from a credit report is extremely difficult and time-consuming. Lawyers and advocates for victims have devised several of the following solutions in an attempt to assist victims of coerced debt:
- NGO’s, lawyers, or advocates may write letters to potential landlords, future employers, or utility companies explaining that, due to domestic violence, a victim’s credit worthiness is greater than their credit score indicates
- Financial educators call credit bureaus along with victims to attempt to argue that items on the victim’s credit report are inaccurate and need to be changed
- Attorney’s place a “note” in the victim’s credit report explaining the circumstances behind the victim’s low credit score
- In order to address the issue of coerced debt, the development of specific pathways for credit-repair by the three major credit bureaus for victims of domestic violence is necessary.
According to Littwin (2012), divorce courts do not have authority over the apportionment of a family’s debt because creditors are considered a third party.. Although the court may require an abuser to pay the debt coercively incurred in the context of domestic violence, this is not binding for creditors, who still hold the victim responsible. Similarly, credit repair is not within the jurisdiction of family courts and debt issues are the responsibility of civil courts, which are typically not acquainted with cases of domestic violence. (Littwin, 2012; Ladika, 2012)