Panel weighs ban on virtual kiosks and new oversight of merchant cash advances

Maria Roy of Legislative Council outlined a House amendment to a file the committee considered on May 19 that would: (1) prohibit virtual kiosks beginning in July, while leaving refund provisions and records‑retention requirements in statute so transactions immediately before the ban can be reviewed; and (2) add a new statutory section subjecting merchant cash‑advance and sales‑based financing providers to Vermont’s licensed‑lender framework.

Under the proposed language, providers and anyone who solicits these transactions would need to obtain a lender license, submit to background checks and examinations, and make specific disclosures including conversion of finance charges to an annual percentage rate to aid comparison with other credit. The draft sets a statutory cap of $1 million for the transactions covered by the protections to focus on small business uses and includes prohibitions on confessions of judgment and automatic debits of business accounts without a perfected security interest.

Maria Roy explained the amendment also includes a records retention requirement for kiosk operators through at least July 1, 2031 and allows the commissioner to set a later date if necessary; refund provisions remain in place for transactions that occur before the prohibition takes effect.

A deputy commissioner from the Department of Financial Regulation (DFR) said DFR did not initially propose the language but drafted the provisions at the chair’s request. The deputy commissioner said DFR has received complaints from small businesses and that some cases have been referred by the attorney general’s office; he described merchant cash advances as asset‑based transactions that often lie outside traditional licensing unless explicitly covered by statute.

DFR staff said the approach follows models from other states and is intended to require licensing, meaningful disclosures — including APR conversion — and regulatory examination authority. Committee members and staff also discussed the fiscal effect on supervision fee revenue (small amounts in the low thousands from existing kiosk renewals) and noted other states had recently taken aggressive actions including bans; one member observed that an operator in the sector had entered bankruptcy in the prior year.

Industry testimony included an operator who described a 48‑hour hold policy and said the company issued a full refund in one instance; the witness and other members noted under‑reporting of harm because victims are often embarrassed to come forward.

The committee did not adopt a final vote on the amendment on May 19 and asked staff and DFR to provide follow‑up analysis and any requested language; rulemaking authority for the commissioner and an effective date of July 1, 2027 for licensing provisions were discussed during the presentation.