Vermont Legislature SmartTranscripts:

[Rep. Michael Marcotte (Chair)]: Good morning, everyone. This is the Vermont House Committee on Commerce and Economic Development. It is Friday, 02/20/2026 at 11:03 in the morning. So now we've moved our schedule up in order for us to be able to release our members that live in the southern part of the state, especially to get ahead of the storm. So we are going to walk through a new draft of H-three 85. Again, it's an act of waiting to remedies and protections for victims of cored death. Maria, as we'd like to start us out, thank you everybody for being available to start early. We appreciate it. Okay.

[Maria Royal (Legislative Counsel)]: Maria Royal with Legislative Counsel. And so, I'm going to walk through what's now draft 1.12, which is essentially draft 1.11, which was reviewed by the judiciary committee yesterday. With two exceptions, this draft has the bank holds language that you looked at, suspicious banking, which judiciary did not see. I don't think they really wanted to. And then there's one other suggested piece of suggested language I was able to get in before coming here today. So with that, we'll go through all of the revisions that are new or highlighted, We'll just start going through each one. So, right on the first page, you'll see this is under the definition of adequate documentation. The first one that's listed is a police report. The second one is essentially a report to a federal, state, or local law enforcement agency. So that second provision was suggested by the Vermont Bankers Association. It models a provision in the New York court stat law. When I was looking at this, I didn't really understand what the difference between the two was, a police report, and so the suggestion here is to strike the first provision and just keep the more general provision and be more general and more specific. Because it's clear that it could be a federal, state, or local law enforcement agency. It also describes the debt, circumstances of the debt, and specifies, as would a police report in Vermont, if there's any false information filed, that's subject to penalties. But I couldn't really see a reason why you would need both of them. That's basically why there's a change. And then this is just something that occurred to me earlier. There is not a change here, but with respect to a sworn written certification from a qualified third party professional regarding the debtor's claim of coerced debt based on information gathered by the third party while acting in their professional capacity. I almost think that last part could be added to the actual certification I certify. Almost seems a little bit out of place here, and the reason not that you can't put it here, but the reason why it came to my attention is because judiciary also wanted to add a conflict of interest provision so that the professional can't be a member of your family. So it might be appropriate to just kind of put all those things together under the certification requirements model language, but not necessary. Then also, you know, just going through this a little bit more, under the definition of force, debt means all or a portion of secured or unsecured debt. And then it just read in a debtor's name. And I don't know if you need to say solely or jointly in a debtor's name. That could be implied through all or a portion. But I'm putting it out there, you can take here further whether that clarification it was the fact that it was in a debtor's name, I you know, should you clarify that it could be There could be co borrowers. Also on line nine, in speaking with representative, he suggested, just to make it a little bit more in active voice, that the debt was incurred as a result of the perpetrator's use of the information or use of intimidation. So Then there's some proposed language. So these are the items that are not considered coerced debt under this subchapter. So on line 14, this is proposed language that came from the Vermont Bankers Association, was not subject to either a default judgment or to a final judgment where the issue of course that was previously adjudicated. I had had a question about whether that qualification, you know, the course that specifically adjudicated should apply to both the final judgment and the default judgment. The answer was no from their perspective. But that that's something for you to consider. I just wanted to point that out. If the answer is yes, that you want it to be qualified, then you probably don't need to say default judgment because it would just be any final judgment. But, anyway, that's for your consideration. Then at the bottom of this page, this is the issue that gets to the repossession or surrender of I added a provision later on that I that tries to address this issue. So we'll get to that and talk about it further on in the draft. Then, under the definition of debtor, there was a proposal from the Vermont Bankers Association to say a debtor is a person who owes coarse debt and then is a survivor of domestic abuse, a vulnerable adult, and the coarse debt was incurred as a result of domestic abuse human trafficking. I don't know if you need to specify that here because you already specify that under the definition of forced debt, so it might just be duplicative. But we can consider that further. You can. And then under the Qualified Third Party Professional, there was a request specifically related to a crisis worker, but that person not be a volunteer, that it would have to be an employee. So what I just did is said a crisis worker, a licensed social worker, or a clinical mental health counselor, and then for all three of them, employed at a program. So I think that kind of just captures it for all of those individuals,

[Rep. Michael Marcotte (Chair)]: hopefully. Could you have a mental health counselor that Is there a mental health counselor that has their own business? To capture?

[Maria Royal (Legislative Counsel)]: It's a good question because and I'm not sure that it actually changes what was already here, because it said a mental health counselor at a program. So if you want to broaden it to be a mental health counselor, not necessarily as part of a program, but somebody who has training in, could probably clarify that.

[Committee Member (unknown)]: Might they be covered under ETH?

[Maria Royal (Legislative Counsel)]: A health Well, care provider? I'd have to look that up too. Off the top of my head. And if they are, then they don't need to be listed.

[Rep. Michael Marcotte (Chair)]: Could have a mental health, clinical mental health counselor that's not, doesn't have a program that assists older dependent adults.

[Maria Royal (Legislative Counsel)]: I think that's a good point. I think that's a good point. So if they fall within the definition of health care provider, we'll just remove them.

[Committee Member (unknown)]: Special worker and mental health counselor. And it's a crisis worker that we're If

[Maria Royal (Legislative Counsel)]: not, then maybe I'll just have a further clarification so that they're not So then in subdivision 9A, the statement of forced debt, just adding a requirement that it be sworn, a sworn written statement. And then there's some additional language below related to that.

[Committee Member (unknown)]: Do we need to add affirm instead of sworn? Because I know we dealt with that.

[Maria Royal (Legislative Counsel)]: I think you're okay with sworn because that can be affirmed. I think it was the oath oath or affirmation. Sworn with the Okay. Title one includes affirmed. So I think you're okay there. Okay. But good question. And then so in terms of what's in the statement, this is a question this is something that I was thinking about as I reread it that Romanette for. It's like the new language that I learned from judiciary, not Roman numeral four. So Obligatory. Yeah. So any information known by the debtor, including account information or credit card information, and what it had said, and the name of the individual in whose name such debt was incurred. So we already know the debtor is the individual. The question is, is there somebody else on the account, a co borrower, I think, which is why I suggested maybe saying, and if applicable, the name of any other individual in whose name such debt was jointly incurred. So, again, for your consideration. A suggestion was just to make sure in that initial statement, the debtor also specify their preferred language. And you can see on line five, this all says specified in writing, but this whole thing has to be in writing, the whole statement. So I didn't think you needed to say that. And so in terms of the kind of self attestation, you'll see new provisions, subdivision c. A statement of coerced shall include the following language inserted above the debtor's signature and date. And that would say, I declare that the above statement is true and accurate to the best of my knowledge and belief. I understand that if the above statement is false, I will be subject to the penalty of perjury or to other sanctions in the discretion of the court. So this is similar to the self attestation language in lieu of a notary that's in title four. So I don't think there's language added here yet, although I have to scroll down, I don't remember, but this is a sworn written certification where there might be a conflict of interest in ensuring that there is a third party that there is not a family member, where you can also further specify. So in particular, on line six, based on my professional interactions with the debtor and information presented, it kind of gets to the, in my professional capacity, I learned of, so just maybe adding some additional language in that statement. So that's where it referred to the definition and said maybe you don't need to put that qualification. So there are a couple of policy big policy decisions, I think, for this committee to make. And so under the creditor's conduct, once they receive notification, the statement and the documentation of the floor step. One of the things that I was exploring a little bit is what the requirements are, the duties of furnishers, creditors, to report information to the credit bureaus, the credit reporting agencies, which is heavily regulated under federal law. So there are two substantive things here. There is one, ensuring that the creditor can remove any adverse information from the credit report, if the creditor determines that it was a result of poor debt. Right? So cleaning up the credit report so that it doesn't negatively influence the debtor going forward. And

[Committee Member (unknown)]: so

[Maria Royal (Legislative Counsel)]: I think you have to track the federal law because it is very specific on the preemption issue, the furnisher's duties and responsibilities, and they're very specific. Do a reasonable investigation. Here's the timeline. Thirty days plus an additional up to fifteen days if the debtor provides additional information within that thirty day window.

[Committee Member (unknown)]: So

[Maria Royal (Legislative Counsel)]: that process is essentially tracked here. And, again, because it's trying to ensure before notice or before the credit reporting agencies are contacted, that they've been consistent with the federal requirements. Where you could then, once that process ends, you have a choice. You could either say that the creditor, just upon receiving that information, doing this investigation, regardless of the outcome of the investigation, cease all collection activities permanently and only have the option of enforcing the debt in court. So that's one option. Another option And, of course, there are many variations. You could say that they can resume collection activities, But if the debtor doesn't pay, and that's pretty much voluntary, they, again, would have to enforce and put. The one thing that I did think of, if you were permitting the creditor to resume collection activities, you might want to specify that they can't sell or transfer the debt. It might be easier for the debtor to be working with one creditor under those circumstances. That's just a suggestion. So what I had stricken is there was language that had been added allowing for reconsideration. Right, it's kind of extending that investigation review period, I don't think you can do that and still comply with federal law. If you would like to have reconsideration for purposes of whether or not the creditor should cease collection, you can do that. There's a lot more flexibility beyond just meeting the reporting requirements. So that's kind of an open discussion about how you wanna proceed going forward. That makes sense? So what do you want the creditor to do now? So once they've kind of figured out what their obligations are in terms of reporting the information and what's on the credit reports, should they be permitted to resume collection activities?

[Rep. Michael Marcotte (Chair)]: Yeah. So the the

[Committee Member (unknown)]: material stricken through then, is that why is it stricken through? Is it because of the Fair Care Reporting Act?

[Maria Royal (Legislative Counsel)]: It is. Yes. Because you that would change the process, the procedures for reporting to credit reporting agencies. Because the procedures don't allow for that reconsideration and that additional time period. It's pretty straight. It's thirty ten, it's thirty fifteen. Right. Right. But that doesn't mean you can't for purposes of

[Committee Member (unknown)]: Yeah. So it's striking through that material because it's conflict or potential conflict with very critical reporting that, but instead, you've outlined some options. Those are options.

[Maria Royal (Legislative Counsel)]: Yeah. And they're that's why the language is not

[Committee Member (unknown)]: Okay.

[Maria Royal (Legislative Counsel)]: You know, if that was more of a policy discussion and then whatever however you want it to be directed, I'm happy to direct.

[Committee Member (unknown)]: Okay.

[Maria Royal (Legislative Counsel)]: So then So this is just a qualification about the communications from the creditor to a debtor. Use the preferred language as identified in the debtor's statement of course debt. In subsection F, in connection with the statement of course debt, the creditor, and this is you know, prohibitions on disclosing information that they've obtained in this whole process. There's it it says, you know, basically, you can't disclose information unless directed to do so by court order. I almost wondered if it should say or authorized. You know, courts tend to authorize things, especially in circumstances like this, as opposed to directing. So that's more of a technical issue. The model form, it might need to be updated depending upon your how you decide to proceed with respect to collection activities. That employment issue, again, I'll just have to make sure it lines up with decisions you've already made about definitions. And then I think this is just a technical change too at the top of page 14, because what's listed above that are the three documents. One of the three documents are considered adequate documentation. And as it had had been drafted before, it looked like there was another option, which I think is how it was drafted originally. Any other document, I just wanted to be clear that that's not one of the adequate documents. So in addition to the required documentation, you may include any other documentation. Alright? So I think that's just clarification. This is just highlighted for me to go make sure it lines up with all of your policy choices. Lines nineteen and twenty, this is just clean I think cleanup language. It had read, If you are communicating with us by email, it seemed like it should maybe say, If you prefer to communicate with us by email. So now we get to the whole repossession issue. And so this is page 15. There's a new subsection H, begins on line four. And we will just read through it once. So with respect to coerced debt secured by tangible personal property, nothing in this subchapter shall affect the creditor's right to enforce a security interest upon default under and there is a reference to the secured transactions chapter of the Uniform Commercial Code, including repossessions, surrender, or court ordered seizure of the subject collateral. However, a creditor is prohibited from collecting or seeking to collect any deficiency from the victim of coerced death. So regardless of the investigation and the outcome of that, the creditor would still be able If there's a default under their contract, the creditor would still be able to enforce pursuant to their rights under the UCC or the terms of the contract. One of the issues that had been discussed by this committee is what happens if the car cannot be located. And there are two things that occurred to me. If it is in the debtor's name and the perpetrator takes the car and cannot be found, it might just become an insurance issue, unless the debtor is not paying their premiums. Because at that point, it it could be considered theft or stolen property. Right? And so you file an insurance claim, and the bank and the insurance company will work it out. I suppose if the debtor is not paying their insurance premiums, there may be a lack of coverage. The one wrinkle is, if it's a car loan, for example, and it's in both the debtor and the perpetrator's name, can the debtor file a claim. Because it's not necessarily stolen under the terms of the insurance. If it's with an owner, we just can't locate it. In any event, this seeks to at least get to the issue of repossession and not having that part of the process delayed, but also protecting the debtor if there's a deficiency. So then, civil legal remedies. So the House Judiciary Committee spent a considerable amount of time talking on this section. I will mention to you, there are some of the issues that they were particularly interested in. You know, the creditor can pursue an action against the perpetrator. When can the creditor do that? Does there have to be a judgment of forced debt? Which is how it reads now. Subsection b, if the court finds a debtless coerced, that presumes there's some kind of, maybe between the creditor and the creditor, a judgment of finding a coerced debt. So question of if there isn't legal action, but the creditor believes there is coerced debt, can they just file an action? And if so, just clarifying that right of action. But then the other ancillary issue has to do with the identification, knowing who the perpetrator is. In the context of domestic violence in particular, that information is not disclosed out of concern and safety of the survivor. What can the creditor do? It's anything. And there is a provision which will well, we did look at this. This was in a prior draft. That has to do with the statute of limitations. Yes. Is

[Committee Member (unknown)]: there language forthcoming on the questions that judiciary was grappling with, or are they

[Maria Royal (Legislative Counsel)]: There is. I know the judiciary team is looking at language, and I know that some of the interested stakeholders have some suggestions about this. Yeah. Oh, yes. And judiciary is expecting language back. So whether they I don't know. Are they gonna have possession of the bill? Okay. So, yeah, they'll have suggestions for you then.

[Committee Member (unknown)]: That's what we wanted them to figure out before.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: Yes, I know. I was

[Maria Royal (Legislative Counsel)]: hoping the judiciary team would be backing me up a little bit more, but they are now. They're going to get more involved. Hopefully we can get all those things. So on this issue about the creditors' rights to enforce against the perpetrator, so this is one attempt at least to preserve their right. This is in subsection I. An action by a creditor against a perpetrator shall be commenced within six years after the date the creditor discovered or reasonably should have discovered the coerced debt and the identity of the perpetrator. So if they don't know the identity, then the statute of limitations is not going to begin to run. I will say judiciary, instead of having discovered or reasonably should have discovered about the debt, they wanted to link it to a specific point in time. So either when they were first given notice of the course debt or when there was an official judgment of course debt. Anyway so there'll be some some proposed language there.

[Rep. Michael Marcotte (Chair)]: It's still linked with learning the idea of It's still work. Right?

[Maria Royal (Legislative Counsel)]: Yeah. Oh, and so they wanted to link it to a specific event knowing once that starts, and also knowing the identity of the perpetrator, whichever is later. So if they happen to know the identity of the perpetrator before, it's irrelevant if it's not until the way after the judgment. So there was a proposal from the Vermont Bankers Association about violations of this subchapter to add a requirement that the violations be made knowingly well, that they are material violations. So a person who knowingly and materially violates this subchapter commits an unfair and then would be subject to all of the penalties and right of action. No? I think there are any other changes other than adding the bank hold language, which is in section four and starts at the bottom of page 22. So we reviewed that language. There was one request, a suggestion by the department, which the chair asked me to include for your review, and that has to do with data collection about Did I not highlight it? I did not highlight it. Sorry. So section five, and this is on page 29. So with respect to suspicious transaction holds, this would require the Commissioner of Financial Regulation to consult at least annually with representatives from the Vermont Bankers Association and the Association of Vermont Credit Unions and any other relevant party determined by the Commissioner for the purpose of collecting data about the number and dollar amount of suspicious transaction holds implemented by a covered entity pursuant to, and it should be, Section IV of this Act, and report such information in aggregated form to this committee and to finance annually. So then I know there's still some discussion about in terms of the coerced debt, should it apply prospectively the way it was in the last draft and it's still here, is it would apply to all outstanding coerced debt even if it was incurred prior to the effective date. Just because I'm going to mention, I just want you to be aware of one of the other items that judiciary was considering is, you know, the provision where it says that in any action, in any civil action, that the judge shall take measures to protect the debtor if it's necessary, sealing records, redacting remote hearings. They just wanna clean that up a little bit and make sure that it's upon request of the debtor, that it's not just up to the judge to determine, and then also providing more specific guidance and criteria for the judge to apply. So you can expect some additional language about that. Think just trying to see if there were anything else that they were proposing.

[Committee Member (unknown)]: Yes, I know they do have concerns about the court order for release of funds and suspicious transactions. Their comment was it's impossible to believe that there will be a court order in that fifteen day period. So I'm not sure that

[Maria Royal (Legislative Counsel)]: Oh, wait. I'm sorry. Suspicious Suspicious transactions.

[Committee Member (unknown)]: A chance to look at it, but I got some feedback.

[Maria Royal (Legislative Counsel)]: Oh, oh, okay. Great. Okay. Okay.

[Committee Member (unknown)]: If it's a fifteen day hold, their comment was to get a court order to release the funds is not going to happen in that fifteen day period.

[Maria Royal (Legislative Counsel)]: That's fair. Understood. Okay.

[Committee Member (unknown)]: It's just been tickling in the back of my head here. Page four, line 17. Dropping in of that joint way. There it is. And if a public claim of any other individual in whose name such debt is joint being incurred, does that then preclude cases where the perpetrator was not their name isn't on the debt?

[Maria Royal (Legislative Counsel)]: That's not the intent. It's only if there are co borrowers. So if that's applicable, then provide the other name. I mean, if it's a bank it's an account, they most likely know that. But if it's an account by a collection agency, they don't know that. But some it's not to require yeah. So it can be just in the debtor's name.

[Committee Member (unknown)]: Okay. That's what

[Rep. Michael Marcotte (Chair)]: I'm saying.

[Maria Royal (Legislative Counsel)]: It's only if there are other joint account holders. That was that's the intent.

[Committee Member (unknown)]: So I was just worried that yeah.

[Committee Member (unknown)]: That was good.

[Maria Royal (Legislative Counsel)]: That's a good question. That all.

[Committee Member (unknown)]: Yeah.

[Rep. Michael Marcotte (Chair)]: Any questions for me? Thank you, Maria. Grace, good morning. Good

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: morning. Thank you for having me back to comment on the latest draft of H385. For the record, I'm Grace Pazden with Vermont Legal Aid. I'm currently the director of the Consumer and Homeowner Rights Project, and I have been working with debtor clients at Vermont Legal Aid in various types of actions for the last seventeen years. I do want to just give a disclaimer to try and beat the storm. My family and I got in the car this morning and headed down to Boston because we're flying out in the morning. And so I have not quite had the time with the most recent drafts that I would have liked, but I have been in communication with the network. And I think Charlie is going to do a bit of a deeper dive, and we are fully in support of their position on the latest draft as we really have the same constituency that we're representing. That said, there are just a couple of sections

[Maria Royal (Legislative Counsel)]: of the

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: latest draft that I wanted to draw the committee's attention to, and I'm going to try and multitask here on my screen and get to the draft you're looking at, which is 1.12. So taking a look at page two of that draft starting at line 14, I think there's just a bit of a drafting issue here in terms of what the intent of this language is. So if you are trying to exclude judgments where a court has already made a determination that there is no coerced debt involved here, I don't think this language quite gets at that. If you include default judgments, it doesn't make a whole lot of sense because by definition, a default judgment is a judgment that happened without the defendant's participation in the action. And so there would not have been any kind of determination or adjudication on the merits. So I think that can be removed. And then the other thing that I would suggest is that you add language to say that it is a final judgment in favor of the creditor in an action where the issue of coerced debt was adjudicated. Because if you have a final judgment that was for the defendant, basically the court has found that it is coerced debt. So that's just a little drafting issue. And then moving on to the issue of sworn statements, and I apologize, the copy that I have printed out is 1.11, so I think the page numbers and line numbers may be a little bit different. Let me see if I can find that in the draft that is currently in front of you.

[Gary (financial services stakeholder, likely credit union representative)]: It's it should be fine because it

[Committee Member (unknown)]: was added to the end, so just tell us where you are in one Okay.

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: I think we are looking at page five that highlighted language down. I think it's line 13. And so I think this is great. I would just suggest that you also include or notarized because I think it's possible, right, think it would have the same effect for someone to essentially have their statement notarized. And I wouldn't want that to be a basis for exclusion of an otherwise conforming statement of coerced debt because now in our statutes, essentially, a notarized document, which is a sworn statement is going to be the equivalent of this affirmation or self attestation language. So that might be something you want to include there. And then if you go later into the draft where there's that model form that the creditor can send to the debtor, I would suggest that this language be input in there because if the debtor is sending that back as their sworn statement, you're going to want to make sure that it conforms to the requirements of what your definitions say a statement of course debt is, and you're going to want to include this language above their signature line on that form. Okay, I think that gets us to page eight, if our pages are still lining up here between drafts. So one thing that I did notice in this section where the creditor is reviewing the documentation and making a decision about what its position is as the evidence that it's looking at. I think it's really important to be clear that a creditor cannot make a determination about the accuracy of a debtor's claim. They are not an arbiter of facts. They're not a court. They're not a jury. They're not making an ultimate determination about the accuracy. I think what they're doing is either accepting the claim or they're disputing it because they have some basis to dispute it. So I would just want to be really thoughtful and clear about the language that's being used there. And then when you go down to the very bottom of that page, and you're in a situation where the creditor has determined that it is going to dispute the debt, I appreciate that this does say that it would have to include identification of the evidence relied upon. I think in terms of fairness and balancing that what would make sense is to require creditors to produce supporting evidence for their dispute that is at least as robust as the type of evidence that we're asking coerced debtors to produce in the first instance. So I might add language along the lines of it has to be either a sworn statement of an officer, employee, or agent that has personal knowledge of facts that dispute the coerced debt claim or that the creditor has to provide specific evidence from the debtor's file that is the basis for the dispute. And I see that there's now language that does clarify that information shouldn't include any personal identifiable information. So that's gonna be protective of the creditor since they have other obligations to protect that kind of information. My concern is really and I've seen this in other contexts as a consumer attorney, particularly with national debt collectors, where this type of determination process on the part of a creditor or debt collector can be used as a barrier to access for debtors. So one example I can give is that I do a lot of mortgage delinquency work, and there are federal regulations when a homeowner who is struggling financially applies for a loan modification or other loss mitigation, and they send a complete packet of financial information to their mortgage servicer. And under federal regulations, the mortgage servicer has a specific timeframe within which they have to review that package, and then they have to make a determination about whether that person qualifies for any specific loss mitigation programs, and they have to provide their basis for the denial, if there is a denial. And what I see very frequently from mortgage servicers is a denial that says something along the lines of, you're denied because you don't meet the program requirements. So it becomes this very generic denial, which then requires the homeowner to engage in an onerous appeal process to have that looked at again. And if it gets denied, then their only option is to go to court and sue the mortgage servicer under Regulation X. And so that's the kind of barrier I'm worried about here, particularly for victims of coerced debt. And I don't think our local banks or credit unions are going to do that. I think they're going to have a much more robust process. That's not who I'm worried about. But this is going to apply to all

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: of

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: the creditors and debt collectors. And so I do have concerns that unless there is a requirement of robust sort of admissible evidence being produced to support that denial, that it can be just used as a roadblock to throw up for coerced debtors, which then will put them in a situation that they're in today, which is having to really take affirmative court action to try and get relief. So that brings me to my final point for today anyway, which is on page nine, the committee really has this policy decision to make about what happens when the creditor does dispute the validity of the coarse debt claim. And again, I think this is really where the rubber meets the road. And I would just really urge the committee to consider the model and the process that was in the bill as introduced,

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: which would

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: require the creditor to take the affirmative action to seek a court order in the situation where they are disputing the coerced debt. And as we've talked about before, the court process is really inaccessible to survivors and debtors in general, really. And even at Vermont Legal Aid, we have very limited resources, which are unfortunately shrinking all the time. And while we may have resources to help coerced debtors through that initial process of putting together their statements of coerced debt and their supporting documentation, it's very unlikely that we're going to have resources to help folks bring affirmative cases in a situation where a creditor disputes their coerced debt claim. Whereas creditors and debt collectors, when someone is not paying, that is always their recourse, and that is what we see creditors and debt collectors doing all the time. And if you look at the civil docket between the small claims docket and the Superior Court civil docket, it's somewhere in the range of 30% of cases are debt collection cases across the different types of debt. So it's really a much more accessible process for creditors than it is ever going to be for debtors. So that's really those are the main points I wanted to cover today. I'm happy to take any questions, understanding that I have not really had an opportunity to look at a lot of what was added on to the end of 1.11.

[Committee Member (unknown)]: Thanks, Grace. Appreciate your feedback. So I'm on the bottom of page eight where we're talking about the creditor notify the debtor if they make a determination, what their determination is, right? So creditor notify the debtor of such determination in writing and shall provide a good faith basis for the determination, including identification of the evidence relied upon. Is that not sufficient to what you were

[Committee Member (unknown)]: requesting?

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: I mean, I think it's not quite as clear or specific as what I'm suggesting. In that identification of the evidence. Again, that could be, we found something in your file that disputes this. Whereas what I'm suggesting is essentially the same level of what would be admissible evidence as that statement of coerced debt. So you're talking about either business records that are reliably made and kept in the regular course of business, which is the type of evidence that we see corporate parties bringing in court all the time. So that would be, you know, specific evidence that is in the file that would need to be produced as part of this process, or similar to that statement of coerced debt that is a sworn statement that is testimony of the debtor, if you have a situation, and I could envision, I mean, I don't think it's gonna happen very frequently at all, but you could have a situation where a creditor has a collection conversation with the debtor and the debtor discloses some information that disputes the coerced debt claim. And so you get a sworn statement of that employee of the financial institution that has personal knowledge of those facts. And I think, again, in terms of fairness and balance, it's essentially the same level of vetting of information as you're asking of debtors is what I would ask the committee to consider requiring.

[Committee Member (unknown)]: Yeah. Yeah, thanks for your comments. And I understand the logistical difficulties. I would hope that you'd be able to send something in writing that talks about those comments or is particularly an interest within the reg x, I think it was, reference in in in federal regulations, because I think that talked about this specific issue of what's the basis for a good faith determination that contesting the state of the court stat. So I'd appreciate at at the very least, I'd like to see that reg x.

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: Yeah. I I I will be reg x, I'm not sure I was clear, but reg x, I think because of the way that is drafted, does not provide this kind of a robust requirement on the part of the creditor, which is what then leads to this like kind of pro form a deny you and we're not going to give you a very, you know, specific basis for the denial, which then leads to the need for appeals and additional process on the part of the homeowner. So I'm happy to share that language, but I would not I would not suggest that that's a good model for this for this bill.

[Committee Member (unknown)]: I hear you. It it would just be helpful me to see what Okay. The elements of what the proper basis for a determination should be from your perspective.

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: Okay, I will try to frantically pull something together before I head out. Yeah,

[Rep. Michael Marcotte (Chair)]: Grace, mean, we're not making any, we're not voting on this today, so.

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: Okay, that's helpful to know.

[Committee Member (unknown)]: Yeah, just a different question. I was a little confused about what you were saying about a default judgment, and whether default judgment could constitute a basis for termination?

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: Sure. So I think the way that the language is currently drafted, that highlighted language in that section, I mean, you can leave default judgment in there, but I don't think it really has much of an effect. Because what this is suggesting is if you have a default judgment in an action where the court has adjudicated the issue of coerced debt on the merits, then it's not coerced debt. But you're never going to have a default judgment where the issue has been adjudicated because a default judgment is issued by default without adjudicating anything. Understand. Okay.

[Rep. Michael Marcotte (Chair)]: The questions for Grace? Okay. Grace, thank you.

[Grace Pazden (Director, Consumer and Homeowner Rights Project, Vermont Legal Aid)]: Thank you very much.

[Committee Member (unknown)]: Chris?

[Chris D’Elia (President, Vermont Bankers Association)]: Good morning, folks. For the record, Chris Delia, President for Mount Banker Association. I have a lot of thoughts that are going on in my head right now regarding draft 1.2, and I'm happy to put that down on paper and get it to you, the committee. I'm just wondering, mister chairman, you have other people who are on your schedule that have not testified on this bill before, and I don't know if you wanna give them an opportunity before you head out. I will, I've done, follow-up with the committee and get you my thoughts on where we are with one point one point one two.

[Rep. Michael Marcotte (Chair)]: Works things that work for you. Okay. That's fine. You're not looking the greatest today either.

[Committee Member (unknown)]: Yeah. Thanks.

[Chris D’Elia (President, Vermont Bankers Association)]: Love you too, mister chairman.

[Rep. Michael Marcotte (Chair)]: Feel better. Thanks. Gary?

[Gary (financial services stakeholder, likely credit union representative)]: Good morning, everyone. Thank you for the time. As Chris said, I certainly am happy to, be brief and allow time to go to other witnesses today. I think we're coming along

[Committee Member (unknown)]: Oh, Mary,

[Committee Member (unknown)]: you just muted. Muted yourself.

[Gary (financial services stakeholder, likely credit union representative)]: Thank you. I apologize. Although I have some concerns, I think we are getting closer and these are not insurmountable concerns. And so, you know, I would you know, I'm happy to provide some written testimony to the committee after I've had a bit more time to review the draft, but I'm happy to allow other witnesses who have yet to testify to move forward. But appreciate that time. Thank you.

[Rep. Michael Marcotte (Chair)]: Thanks, Gary. Charlie?

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: Good. Almost afternoon. Harley Glisserman. I'm the policy director at the Vermont Network Against Domestic and Sexual Violence. I too have been looking over this latest draft, and I have a couple comments for the committee to consider. So I first want to just recognize that this committee's process has been centered on compromise and balancing stakeholders' needs. We certainly appreciate that, and we want this final product to be truly protective of survivors. And so I will keep my comments to a few pieces that I think are really important to preserve the integrity of this process with that goal. We agree with the comments raised by legal aid and want to first start on page eight.

[Maria Royal (Legislative Counsel)]: So

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: I would note that, again, this claims process has changed over time and overdrafts. And right now, there is a claims process that introduces creditor discretion. So they're reviewing a claim and making a determination about its validity internally. And I will be transparent that for the lenders who have participated in this policy discussion and who we've heard from, I'm not concerned about them certifying course debt claimed appropriately. But not all lenders are like the ones that you've heard from. And so those are the kind of things that I'm trying to think about and how to create some external checks so that course debt claims are certified appropriately. And I think that there are two things that the committee can do to support that. The first is requiring a creditor to provide evidence of a similar nature to what a debtor must produce if it does not accept the validity of a coarse debt claim. So as Grace noted, this could look like a sworn statement from an officer or employee or an agent of the creditor with knowledge of the facts that disputes the creditor's statement or specific evidence from the debtor's file that is the basis of the creditor's dispute. We've talked a bit about the resources that survivors may or may not have access to in this process. Very few have access to legal representation. Many have had their financial information held from them over the course of an abusive relationship, and yet they still provided this documentation to a creditor. And I think it is a very balanced and appropriate process to expect the same from a creditor if they're disputing the validity of a court stat claim. The next thing that I think this committee could do is on page nine, in these options that are laid out around if a creditor does not accept a forged debt claim from a victim, what then happens? I agree with Grace. This is where the rubber meets the road, because this is what will determine whether a victim has to proactively bring a law suit in order to get relief or not. As Grace has noted in previous testimony, ninety four percent of individuals in debt collections lawsuits do not have any legal representation. It takes a massive amount of resources to bring a proactive lawsuit to get relief. Victims are not in a position to do that today, and they will not be in a position to do that even if this bill is passed. And I think that's the reality of what we're working with. So I would really strongly encourage the committee to look at that option three and cease all collection activities until a court finds that the debt is not coerced. I think if the committee is not going to pursue that option, I could offer some alternatives that would strengthen that process. And I would just say, I think it would really impact a survivor's ability to access relief under the bill if that option three is not included. One other piece before I turn to one comp Option one, right? I think it was option one, and I believe it's now option three, ceasing all collection activities until a court finds that the debt is not course debt.

[Committee Member (unknown)]: That that not be included. That that be included. Okay, I thought you said not be included. Apologies. Okay,

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: great. Thank you. The last thing that I want to do before I turn to the bank holds language is just bring back a story that I shared. I looked at my testimony from last year. It was about a year ago today when we were discussing whether core stat study committee would be ordered by this legislature, which you eventually did. And I shared the story about a survivor whose abusive partner threatened to physically harm her if she didn't cosign an auto loan. Her partner then withheld access to the keys on that vehicle. And her partner did not pay on that loan. And years after she left him, about ten years, she is still paying off that debt and her credit is destroyed. And she, when I spoke to her last year, was living in unsafe housing conditions because she could not get a loan to either buy a new home or to make needed repairs on the home that she lived in. And so she was in situations where she had leaks in her roof that she couldn't repair and was at points not able to heat her home in the cold. And so as you all are considering what kinds of debt are covered by this bill, I would very strongly encourage you to maintain the definition of forced debt that you have in this current draft. The last comment I have for today is on page 24. So this was a a comment that I raised last time I testified, and I just wanted to note it again for the committee. In the definition of associated third party for bank holds, it does still include lines six through eight that allow an associated third party to be a parent, spouse, adult child, sibling, other family member whom a covered entity reasonably believes is closely associated with the customer. I still have real concerns about unintended consequences of someone who does not have legal authorization to access a person's financial information being provided this notice. The example I provided during testimony last time was what if a survivor establishes a safe bank account because she is preparing to leave an abusive relationship, makes a large withdrawal from that bank account, and then her abusive partner is notified of that withdrawal. I think that the types of parties listed in B through D have a very different kind of legal authority to access this financial information. I have fewer concerns about the other items on this list, but I would request that the committee, again, remove lines six through eight on page 24.

[Rep. Michael Marcotte (Chair)]: We haven't had any discussion on that. I think we'd like to hear from the bankers and the credit unions and probably maybe the EFR as well as their thoughts on that piece too.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: Perfect. I think that sounds great. We'll continue moving through the process, and if there's any information that I can provide on that, I'll be here.

[Committee Member (unknown)]: Cool. Hey. I'm thinking about the Fair Debt Collection Practice Act from my recollection of, like, twenty five years ago, so it may have been changed. I know that when you're doing collections, you can't even indicate that it's a collection agency when you're doing calls and you're calling the house. So are you even legally allowed to reach out? Well, if they have it on their account that they're a trusted person. Never mind. Just answered my question. Thank you.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: Thank you.

[Committee Member (unknown)]: Yeah, thanks. I think when you were talking about determination by

[Rep. Michael Marcotte (Chair)]: is And there was You know, they

[Committee Member (unknown)]: said, we don't we reject the claim of the course debt, and you gave me a preference in terms of those three options. I think you said something about now if that wasn't gonna be something that was in was in the bill, we haven't really discussed these options. Mhmm. But I think you said that if that wasn't gonna be option three, you would have some additional suggestions for how to, I think, strengthen the process or something. I, for one, would find that useful to hear what those options are.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: I think it really depends on the exact procedure and what it looks like, and whether the committee considers some of the other options presented today around how to strengthen the types of evidence that a creditor is providing. But I do not think that there is a replacement for an external check within this process.

[Committee Member (unknown)]: I understand. I just didn't know if you had some I do remember what Grace talked about in terms of kind of showing the need to be.

[Committee Member (unknown)]: Getting back to the the bank hold stuff. Mhmm. I'm just curious. Since you've worked with people in these situations, in a situation where someone makes a large withdrawal, what do they do next? I mean, I can't imagine that they would just take $15,000 out cash. So curious what their next steps usually are.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: I think it really depends on the survivor and what they need to access safety. I think for some people, they will go to a shelter run by one of our member programs if there's space available. Maybe they will go to trusted family member. Maybe it is out of state. Maybe they are lucky enough to secure housing on their own, and they will use some of that money for a security deposit and first month's rent. It just really depends on whatever that survivor is up against as far as risk to their safety and what are their most accessible next steps.

[Rep. Michael Marcotte (Chair)]: Thank you, Carolyn.

[Harley Glisserman (Policy Director, Vermont Network Against Domestic and Sexual Violence)]: Thank you all.

[Ed Cota (Meadow Hill, on behalf of the Vermont Vehicle and Automotive Distributors Association)]: Ed Cota with Meadow Hill on behalf of the Vermont Vehicle and Automotive Distributors Association. I'm here to just paint the big picture and then point to my friend Mitchell, who's the vice president of ADA and has extensive experience here in Vermont selling cars. So big picture, we sell about a 100,000 cars per year in Vermont, new and used, 60,000 used, 40,000 new of those vehicles. And all this data is collected by Experian and published on our website. And these are round numbers. You can find the exact numbers on our website. But of those, about 50% of vehicles purchased, both new and used, are financed. So we're talking about 50,000 transactions per year in Vermont on behalf of the car dealers who serve as essentially the middleman between the financing companies that provide the loans and the customers needing the cars. And so this is of, obviously, we understand the issues and why we want a bill like this. But we also wanna wanna make sure there's not unintended consequences for the Vermont car dealers who will have to adjust their practices in accordance with this law. With that, I'd hand it over to Mitchell Jay.

[Committee Member (unknown)]: Afternoon, Mitchell.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Hey, good afternoon. Thanks for giving me time to come in and speak to you guys today. I'll try to speed this up because I'm sure you want to get out of there. I realized that I was dealing with the original version, so about three quarters of my notes need to be like dropped off or adjusted anyhow. But, you know, I want to say obviously we recognize the concerns and realize protecting survivors is important, but, you know, like Matt said, I want to talk a little bit in the real world of how this actually affects consumers, small business, and perhaps even access to credit from the point of view of the actual dealership out there selling the cars. Matt mentioned the amount of sales. So in 2025, those numbers say that auto retail sales in the state added up to about $2,400,000,000 of transactions. So it makes us a very large driver of retail sales in the state and we employ thousands of Vermonters in our industry. So when we talk about a change like this, it touches a large part of our economy and a large number of families and consumers. I just wanted to go over with you, if you got a few minutes, just how auto financing really works from a dealership point of view. And so when you look at it, the Vermont dealers don't really lend money the way the bank does. Vermont has an indirect lender statue and what the dealer does is sells a vehicle and then prepares a retail installment contract. And we do that with the intent to sell and assign that contract to a bank, a credit union, some lender licensed in Vermont. However, I think this is the critical thing to understand and this is why the bill scares the member dealers. Every lender agreement I've ever seen requires a dealer to stand behind the contract. So what it says, these agreements in one form or the other have some legalese that talks about how the agreement is valid and forceful free of defenses and that if the lender can enforce the contract, the dealer is required to repurchase the loan including unpaid interest fees and costs the lender has incurred. So while technically this bill regulates the creditor, the holder of the note, the economic risk of this bill more than likely would flow right back to a Vermont dealer. I know that when I looked at the half dozen bills in other states, you know, certainly states like California, Minnesota, and Connecticut limited this protection to unsecured debt and stayed out of the quagmire of secured debt. New York and Texas did include secured debt like we now seem to be. So it's limited to after the collateral is repossessed and I have some problems with the timing of that in the real world. But to go over what happens with this and a little bit more a thing for what it'll do to a small dealer is if you look at it right now, the average auto loan, which these numbers are just rough from some Experian data, but the average loan for a new car is around 40 plus thousand dollars today and roughly 25,000 for a used vehicle. If the lender calls up and forces us to repurchase the loan, one loan for some dealers could be devastating. Two or three can be devastating for almost any dealer. So, I know the intent is good and I certainly don't want to see people with coarse debt punished, but this bill just decides, you know, I think it's easy to say, well, the lenders is big entity, they can absorb this. But in the case of indirect auto financing, the person absorbing the bill may be a small dealer that's self employed, sells five or six cars a month and gets straddled with a very large loan, keeping in mind that in many cases, the vehicles are hard to find and don't end up being repossessed because, hey, you can't find them. They've been damaged without insurance. I could give you a list and list of reasons. It also means the chargeback in many cases exceeds the loan value because I've seen large debt contested before and what I discover is that we have a, and this goes back to when I was a new car dealer, but we have a loan that pushes that 40 or $50,000 limit on a pickup truck. The consumer drives at fifty, sixty seven thousand miles a year. So all of a sudden the collateral value at the end of about two years is very little, yet the debt is still large. And then I don't see it so much as a problem like we've been saying with our Vermont lending partners and our credit unions, but what I do see with the national banks is they then have many times lawyers get involved at $1,000 an hour out of Hartford, Connecticut, And it doesn't take very many hours of those to get led to the fees they have. They have the repossession agencies that they try to chase the car down and can't collect it. So the death that I would have thought had been paid down to maybe 30,000 ends up being $50,000 $60,000 on an original 45,050 thousand dollars loan. So I think you can see what I'm saying is that chargeback can be devastating to a small Vermont business and everything. And again, especially that very small dealership that employs just one or two people. I know even now as a small used car dealer with two stores, one of those, one or two of those could wipe out the profit for a year, year and a half or something. When I was a new car dealer, I might have been able to absorb a couple of those without a large issue though it still would have been very painful and everything. So, I'd urge the committee to consider that. I also want to say that in the real world what happens is much too often the holder of the note will spend a lot of time defending it, but it's easy to just charge it back to the dealership once it's uncollectible and we never had the right to do anything. At this point the debt's now canceled. I can't enforce it, but I just ate the debt and everything instead of the institution that purchased it. And I certainly didn't know it was going to be unenforceable. You know, last thing with unintended consequences that I always mention is ironically, lot of the customers that can be affected by this sometimes are some of the people with past credit issues that sometimes putting two people together on the loan, and hence why we see the coercion sometimes to get somebody onto the loan, are people who have had past credit issues, and they rely on specialized subprime or near prime lenders, and those lenders are usually specialized lenders that fall outside the purview of what our local Vermont banks or local credit unions are willing to finance. Already, I'm always trying to find lenders that will finance that type of customer as I go to trade shows. Many of those lenders choose not to operate in Vermont just because of the size of our state being so small and the cost for them to seek an indirect lender license and then incorporate Vermont's provisions into their processes. So, I certainly want to make sure too that a bill like this doesn't press uncertainty and risk that may push more lenders out of the Vermont market. And that's that unintended consequence sometimes of a very small state like ours where lenders will just say it's not worth doing business in the state for what little bit of business we write there versus lenders that will complain. And one of my examples was talking to a lender one time talking about the default rate in Florida, even with 40% as the usury rate, they were still saying they couldn't make money, but they stayed in Florida because the volume was too big to pull out everything. I don't think you see that argument in Vermont. It'll be easy just to say let's pull out. So, I think what I'd like to say is I hopefully understood it if you have any questions, but I just think there needs to be some clear rules on repossessions because again, it's hard to know what the debt was that's been released if the car cannot be repossessed. It's not like a house that sits on a piece of property. It's something that can be moved, can be destroyed. So, there's a few things there. And then perhaps some clarification for signing and dealer repurchase exposure. So, and hopefully these changes could still be made to protect cyber, you know, without destabilizing the secured lending market for indirect auto lending. And it's not just car dealers, mean, auto lending also affects a lot of other, sellers of snowmobiles, RVs, ATVs, trailers, I mean, and the list would go on and things. So I appreciate your time. I'm sure we'll have some more comments. I know some of the bill, I didn't have time to review it until we were sitting here. But hopefully you'll find some solutions and hurt our concerns.

[Committee Member (unknown)]: Thanks, Michael? Can you explain to me the benefit of indirect car loans? Because I've never heard of this before. So I didn't know that this was a practice. I assumed when I bought my vehicle, I was getting a loan through

[Rep. Michael Marcotte (Chair)]: the bank.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Yeah, okay. So, know, indirect auto lending has gone on for years. NADA, the National Auto Dealers Association actually did a study when I was on their board of directors a few years ago because there was some conception that just going to the bank would be the better way and there's nothing wrong for many consumers who just go to the banks. But in the case of my business, we finance between 70 to 80% of all transactions we do. And so what indirect lending benefit for the consumer is more choices. I've always heard sometimes when we have discussions about lending in Vermont at the legislative level and with various stakeholders, you know, that our 20% usury rate on a used car is ridiculous. It should be 10%. We did some things like the EB bill for money, the capstone where if the loan was over 12%, we wouldn't loan the money because that rate is just too high. But the reality is there is a lot of customers out there that the risk factor because of their past credit history and if they don't mend that credit history, interest rates of 20% don't even cover the losses that the lender will have. But within that parameter of 10 to from zero to 20% on a used car allows me to find lenders that are not Vermont based who specialize in that sort of thing. Examples would be Santander, Westlake, Consumer Acceptance Corporation, even large ones like Ally Bank will have some programs for consumers that in Vermont, if we said you're only gonna go to a credit union or a Vermont based lender, they're probably gonna be shut out of the market. They just won't be able to get a loan. It also allows us the flexibility. Unfortunately, some people like to borrow for two cars and only have one. I think our Vermont based banks and credit unions are probably a little more solid ground trying to say no to these people, but there are people that have the credit, have the capacity, and the bank will waive the fact that the collateral isn't sufficient because they do have the capacity to pay. That's where we rely on that. And that affects a lot more Vermonters than we think, Enough so that fifteen years ago or so, we actually created a form when working with the attorney general's office and the department of financial regulation to tell customers what kind of equity stake they have in their loan. So basically, you come in because we're indirect lenders, the statute requires us to sell that loan within just a very short period of time because we are not licensed lenders. And so we will go out and get a pre approval from a lender first. But if you ever really go home and look at an installment loan agreement or a lease agreement, you're going to notice that the buyer is yourself and the lender will be the name of your dealer. Down at the bottom is a section where we assign the contract. Now I say we usually get it pre approved. I will admit it's Saturday afternoon at 04:00, none of the credit unions are open, the banks have gone home, and if you come in with an eight twenty credit score trying to borrow 90% of the vehicle value, We're just going to put you in a car loan knowing the bank's going to buy that loan in the morning and everything. So it provides a lot of convenience. It saves people sometimes having to go to their bank and drive back and forth a couple times. It saves a lot of questioning what is the collateral, what's its value in relationship to the loan, and it really opens up choices for Vermonters. So that's really what indirect lending is, and it has, I think, a real big benefit for consumers, especially for consumers with credit challenges here in the state that are beyond the risk tolerance that some of our local Vermont lenders want to work with.

[Committee Member (unknown)]: So if I understand it correctly, kind of like a second mortgage. Is that well, that's not I don't know anything about second mortgage. So just, it's not.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: It would very similar to you if you think about it, many Vermonters get house mortgages from companies that are not banks at all. But that loan has already been sold, pre sold, pre approved for sale to a loan to a large bank who's probably going to collateralize it into a package of many millions dollars of loans and sell it to a loan servicer. And so again, a lot of home buyers do the same thing. They buy the home and I'm just making up a name, it's East Rise Home Financing that they borrowed their money from, but they almost immediately get a letter telling them that Wells Fargo will be servicing their loan. So it's fairly standard in the industry. It helps the banks. I mean, work really well with the Vermont bankers, a lot of the banks here and especially well with the Vermont Credit Union League. For a lot of those having us do the loan, helps bring them new customers they're not gonna see and it's convenient for their members. I mean, I know a lot of members say they work with East Rise, it's a lot easier to come in, stop into my dealership and be able to get it all done in one place without having to run over to the bank and sign documents and pick up a check and stuff. So it's very common. The one thing I didn't mention though that really becomes problematic again is if you have a bank and I've never had this happen to me, but I have had it happen in a business I was managing for a dealer before I bought a new car dealership. Had a loan charge back, and when we went to try to repossess or collect the loan, the lawyer on the other side was smart enough to catch it and realize that we were now the holder of the loan again. And unlike the indirect lender statute that allows us to write the loan and hold it for a short period of time until we assign it to a licensed lender, We were now the holder of the loan and we are not a licensed lender in Vermont and therefore the penalty is the loan's valid and not uncollectible. So it was like just saying there, we got the loan charge back and we might as well just throw it out and call it a complete loss. We didn't even have a right to repossess the car and everything.

[Committee Member (unknown)]: So for example, if a local business, hardware store offers credit lines. We're currently under this bill, we are applying to that. It's kind of like that. You are offering that credit. You're making that decision to offer that credit. Granted, there's unintended consequences of it's going to make it difficult to get more vehicles out there, or quicker, should I say. But it's not much different than the bill applying to a local hardware store, correct? Is that?

[Committee Member (unknown)]: Well, we're not talking really about this bill anymore.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Okay. Think the difference though is the size of the transaction, which is why I mentioned it. You know I go through these laws always and the local hardware store sells a lawnmower or toaster or something. It reminds me of consumer fraud statues when you talk three times the cost of the thing, $50,000 car, three times is 1 and $50,000 loan. These loans are rather large and this bill is talking about creditors, but we have that outside problem of if this bill calls, if this bill without some guardrails that say it does not apply, in other words it's the elimination of the debt is with the holder of the bill and can't be charged back, then I don't have as much problem. But you are pulling us back in as creditors even though we no longer hold the bill because of the fact that every agreement I've ever read said that we buy back debt that's considered not valid.

[Committee Member (unknown)]: But there is, I mean, you can get, like you can work with companies that don't have that.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Don't know of a company that'll do that. I mean, one of the Vermont Credit Union lead members that's in their bill that I've certified the bills valid and every Vermont bank I've ever worked with it's in there. I've never seen a lender that will buy a loan. And I don't blame them for that one because there could be other reasons that it's not valid that the dealer knew about, but this is a case that I wouldn't have known it wasn't valid when I sell it. The question the way these are written is not was it valid when it's if any time the debt becomes not valid, subject to set off, you know, any type of dispute, it's just a matter of charging the dealer back at whatever time they want.

[Committee Member (unknown)]: I don't think I'm going to get the answer that I'm looking for on this, so I'm not going to continue. I'm a little confused on it, maybe I'll talk to somebody about it.

[Committee Member (unknown)]: Thanks so much for testifying. I really appreciate this. Just want to be clear. You're talking about this impacting a lot of dealers, and we're anticipating perhaps one to three people taking advantage of this protection a year. So I hear the concern. And I'm hoping that based on what has happened nationally, where these laws have been Thank goodness, this is not a rampant problem. And we are trying to protect people who have no other protections and give them some recourse. So I just want say that at the beginning, just to decontextualize this. My question for you is what kind of training do the finance managers at these dealers go through when they're talking to people? I know there's a lot of pressure because car sales is contingent, right? Your income is contingent on the sales. But what kind of training do the finance managers have at the dealers and used car dealers also?

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: So the training is gonna vary from dealer to dealer. I mean, I know that NADA puts out some excellent guides to make sure that we're complying with a huge amount of different federal regulations on lending. I know one of my frustrations a lot of times with issues similar to this is knowing who a vulnerable adult is. I mean, can pull a credit barrel and look at people's credit history, but I can't tell if the customer sitting in front of me is being abused or something. If the question is training on that, I'm not sure how you do it. I know anecdotally, like you said, my daughter ran into somebody in the last six months that came into our dealership and the giveaway to her that there was an issue was the gentleman was in his 70s and the woman he was with was in her 20s with a baby and she was pressuring him very hard to sign the loan for the two of them that day. Thank goodness at one point when she went out to get her driver's license out of the car, the guy spoke up to my daughter and said, I can't say no to her, but I have a guardian down at the VA that's in charge of my money and affairs. And can you please not say I said anything and can you handle it? So we took care of it for him and basically just took the told him, we'll take application and we're going to deny it and send out an adverse action notice without really giving any reason. So other than it didn't fit our lending criteria. So you could say, is there a dealer that would have done nothing? I don't know, maybe. I mean, but we do have training. I think the hardest thing is trying to identify this type of person. Though I'm glad to hear it's only one to three cause I was going ask do we know how many it is, but I still remind you if that's a small dealer that makes 50,000 a year and he literally has loans on every car and then he has one of these charged back, you possibly put him into bankruptcy though too and his family now suffers. If it's that small, you know, I always look at bills like this and go, I don't see the government go, hey, let's set up a fund where we'll take care of the one to three. It's taking from somebody to relieve somebody else unfortunately. I'm concerned what that does. It feels sometimes like unjust enrichment when the car dealer gets charged back says, well, you suffer the loss for nothing you did other than the person that signed the loan was in a really bad situation. You're choosing one over the other and it just does not seem fair.

[Committee Member (unknown)]: Yeah, you know for me,

[Gary (financial services stakeholder, likely credit union representative)]: I think that the car

[Committee Member (unknown)]: situation is among the most hands on and really has the most control. This is not an e loan. This is somebody who has a face to face option. And I have a feeling that there probably is additional training that would protect auto dealers significantly from these situations. So I think maybe we want to look at that as something that we could do going forward.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Okay, thank you.

[Committee Member (unknown)]: So I confess, not all that familiar with indirect lending, right? And with retail installment kind of aspect of that, but I'm wondering whether, who's the creditor in that situation? And maybe that's complicated by, you know, the ultimate lender calling a loan or something, but I'm trying to understand who the creditor, because this is all focused on creditors, and, you know, putting us in requirements and stuff like that. Who's the creditor in that situation? Well,

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: so the simple answer, and again, I'm not a lawyer, but from my past practice, the creditor is the holder of the note that's trying to collect it, that owns the note at that time. But in the middle of one of these disputes, they have the right to make me repay the note, they've signed, they reassigned the note to me, so all of a sudden I'm the holder of the note, and then in that case I'm not a licensed lender, I can't hold the note, so I have a double problem.

[Committee Member (unknown)]: Yeah, that's that's kind of the way I was looking at it, you're thinking.

[Rep. Michael Marcotte (Chair)]: Other questions? Mitchell, thank you.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Alright, thank you very much everybody for the time today, I'm sure we would like to get out of there.

[Rep. Michael Marcotte (Chair)]: But we'll, you know, as this progresses, if you wanna come back in and speak to us more often, you're more than welcome to.

[Mitchell Jay (Vice President, Vermont Automobile Dealers Association)]: Well, I'm sure Matt will keep following it and everything and we can either make some comments or come back in if we see some real concerns still. I really appreciate the time today.

[Rep. Michael Marcotte (Chair)]: Great. Thank you.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: For the record, Joe Valenti, director of policy at the Department of Financial Regulation. I will keep this very brief. I do have a couple of comments on the suspicious transaction holds and a few other other comments to make. As I described it sort of at the beginning of this process when sharing the act 23 reports with you all, we've offered the committee some recipes, and it's up to you to decide what you do with them. You can take out the dairy, take out the gluten, add salt, add spices, etcetera, figure out how it best best fits your needs. We're not taking a position on this bill. We do recognize the good faith negotiating efforts by the committee and by all parties to balance the need to support survivors and the need to address uncertain liabilities for lenders that affects some markets as a result of those protections. We also recognize the importance of addressing due process and civil procedure concerns in house judiciary. I'm not an attorney. I appreciate that nuance especially, and we want all parties to be able to exercise their rights because there there are important trade offs here between the debtor, the perpetrator, and the creditor. With regard to suspicious transaction holds, first, some background on the data collection language that was added. That was something that was mentioned in our report. We appreciate the committee bringing it to our attention. It's an awkward way through a preemption issue that we face in that as a state bank regulator, we can collect information from the state chartered banks and credit unions under our jurisdiction. We cannot compel information from out of state banks or from national banks. And so we're not able to collect that information on our own. And so the way that we propose moving forward is that we would be able to consult with the Vermont bankers and the Association of Vermont Credit Unions who would have that information from their members to find out what's going on with transaction holds in the community, how frequently it's happening, what the dollar amounts are. It's in their interest to collect that information and for us to coordinate on this topic anyway. And so it's plus, it seems like a no brainer for us to to collaborate and to be able to make that available. We want to know whether the policy works, and I know there are other instances where this kind of information has been tracked, and and you can see the number of people and, frankly, the number of dollars saved from financial exploitation that way. It's a very useful metric. I appreciate the committee keeping that keeping that broad as we continue those conversations. The other point, to address the point that Charlie had made around authorized third parties, that is a policy decision for the committee. I think it's a really it's a tricky situation because in a perfect world, every customer might have a trusted contact that they've identified in advance. That person is trustworthy, not likely to, you know, rip off whoever the account holder is. They're reliable. They're accessible. And in that case, when a suspicious transaction comes up, the the bank or credit union can go ahead and, oh, here's the person who we're authorized to contact. We can contact them. You know, again, if that person is trustworthy and reliable, and then they're able to help handle that situation. We do know that trusted contacts can change over time. We do know there is potential for abuse even within that situation. This section that was pointed out extends it not just to these authorized trusted contacts, but to other unnamed parties, partners, family members, etcetera. And as I recall, the context in which that came up was essentially that, you know, maybe there's no one on record or we can't get ahold of them, but it's a small town and we know the child or the partner or the parent of this individual, and we can go ahead and contact. And there are cases where that may absolutely be the right decision. There are cases where that's absolutely the wrong decision. So I would leave that. I think it's something where you may want to get testimony from the different stakeholders, and it's something that you may want to explore on your own. But overall, I would say that to the extent that these provisions are building on what we've seen in other states on both issues, creating protections for suspicious transaction holds and coerced debt does have potential to significantly help vulnerable Vermonters and would appreciate any questions that you may have.

[Rep. Michael Marcotte (Chair)]: Questions for Joe?

[Committee Member (unknown)]: Thanks. Getting back to that question of who's the creditor in the auto dealer kind of situation in direct lending and particularly that point about, I guess there's some provision about calling them home. Right. And I'm not asking for an issue right now, but that would be something that I'd be interested in hearing from you folks in terms of who's the creditor in that kind of situation.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Right. And it's something we can look at. I mean, that could happen. We think of it more with secured debt, but it could happen with any type of loan, right? Credit card credit card loans get packaged and securitized too. You know, student loans can change hands. So it's always there's always going to be this issue of sort of who who the creditor is. And same thing if debt falls into default and can end up in third party collection, right, where it's no longer the original creditor, it's a different entity that that could be bought and sold further down the line. So there is these types of arrangements where loans are sold and transferred, you know, can happen with any kind of debt.

[Committee Member (unknown)]: No. I I appreciate that. I'm just thinking about when the situation where they called the loan, and then you had the auto dealer placed in the right kind of situation, whether well, you know, who should fairly be considered the creditor in that kind

[Committee Member (unknown)]: situation. Right.

[Committee Member (unknown)]: I appreciate the point and it's something we can look at. One of the three options that were was provided to us was they can continue to try to collect the debt, but you can't transfer. Would I mean, that because technically the loan is with the the case of the car dealership, it's with the actual loaning company to transfer it back would be that would be possible, right, under that circumstance? Or am I not making it

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: I'm wondering I

[Rep. Michael Marcotte (Chair)]: think we need to understand what that relationship is and the authority that the creditor has to move that loan back to Cardani or or And

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: and that could be I don't I don't know. And it's a legal question. It's outside of of my area. But whether the, you know, committee makes a decision about not being able to sell or transfer the loan, how that relates to the contract that the dealer and the lender that the dealer and the the finance company have with each other.

[Committee Member (unknown)]: So in a nutshell, does contract law trump statute?

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: It's a good question. I the way I I the way I was thinking it, by the way, I know there was the mortgage reference. Earlier, there's this I I am to to make another analogy, I see it as kind of like if you if you signed your mortgage with your realtor. Right? And not to complicate the matter further, but that's sort of, you know, how I would I would look at that that situation and what's the ongoing obligation. But those are about the contracts between the parties, so it's hard to say.

[Rep. Michael Marcotte (Chair)]: The other question? So so if you could track that down for us, it's Yeah. We'll be taking this up again next week and we need to I mean, I think we're getting there. We're narrowing things down and hoping that next week we can bring it to the finish line. So we can work with Maria. And

[Committee Member (unknown)]: Anyone else who wants to

[Rep. Michael Marcotte (Chair)]: Yeah.

[Committee Member (unknown)]: Have comments, I'm happy to have conversations.

[Rep. Michael Marcotte (Chair)]: Yeah. Okay. I think that's it for today for us. Those of you that live in the southern part of the state might want to think about jumping in your car. So we'll be back on Tuesday morning and check your email for the agenda. Working on that. I know that 09:00 we'll be working with Rick on our letter to appropriations and after the launch. Then we have to look at something to say. We're going to continue to work on CT next week as well and the. So with that, thank you committee. Thank you everyone, especially thank you to everyone here today that moved us into a quicker schedule. We really appreciate your flexibility.

[Committee Member (unknown)]: And worked through lunch with us. Yes.

[Rep. Michael Marcotte (Chair)]: So with that,