Vermont Legislature SmartTranscripts:

[Michael Marcotte (Chair)]: Good afternoon, everyone. This is the Vermont House Committee on Commerce and Economic Development. It is Friday, 02/27/2026 at 02:40 02:35 in the afternoon. Back from a short break now. It's time for some committee discussion on the avenues that you wanna go in. Maria, if you'd like to join us. Hi, Maria. Hello.

[Unidentified Committee Member]: It's too bad.

[Michael Marcotte (Chair)]: It's a happy day. Spoke with the terrible moment.

[Unidentified Committee Member]: So

[Michael Marcotte (Chair)]: I think, yeah, one question about, you know, there was a lot of discussion on third party debt collecting. How do we regulate debt collectors in the state? Is there anything we could add to the bill that I think we wanna make sure that they're following this law, if it becomes law, and then who would oversee that?

[Maria Royle (Legislative Counsel)]: So at the risk of sounding like I know more than I actually do know, because I've only been researching this, like, a couple of days. But so the state the attorney general has adopted rules on debt collection practices, pursuant to their consumer protection authority, which has some overlap with the federal law on debt collection practices. Few things just quickly. I think what you heard first from Andrea is correct that original creditors generally do not have to comply with the federal law. It applies to third party collectors, generally. However, under the state rules, debt collector includes a creditor the original creditor trying to collect on their own claim. In terms of anything that you passed in state law that conflicts with in any way the rules, the rules would have to be amended to comply with state law. They're subject to state law, basically. So and I think you even Chris Campbell, I think, spoke about this earlier. I think you talked about should I think you asked them, should they be amending the rules to conform with this? And they said no because we will do that anyway. So that's, like, almost the extent of my knowledge on debt collection practices. So if you wanna hear from the AG's office or Rick later just to confirm.

[Michael Marcotte (Chair)]: I think maybe we will maybe review what they have in their wheelhouse and make sure that people are complying. But if it's under consumer protection, think there's pretty broad authority to regulate. But we want to make sure, because then we can, in this bill, add some parts to it if we need to.

[Herb Olson (Member)]: I don't know if was written. I read the rule similar. Did the attorney general have the authority to do an examination of compliance with the law, absent some allegation?

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: I don't

[Maria Royle (Legislative Counsel)]: know specifically.

[Michael Marcotte (Chair)]: That's fine.

[Maria Royle (Legislative Counsel)]: Yeah.

[Michael Marcotte (Chair)]: But I think you're talking about an examination would be like on a credit union or any of the financial institutions that are subject to state of to DFR. I don't know it, then I don't know what the Fed does. But

[Herb Olson (Member)]: Actually, I was thinking just generically, you know, in terms of whoever is obligated under under this bill Yeah. Whether someone has the authority to examine whether they're complying with the law.

[Michael Marcotte (Chair)]: Yeah. I know. I wonder yeah. I I don't know. I mean,

[Herb Olson (Member)]: I I I think with the state regulator, you know, you hit licensed lenders, state charter. That's cool.

[Michael Marcotte (Chair)]: Yeah.

[Herb Olson (Member)]: And then that's why I was asking the debt collection agencies too. Then But if they're under the attorney

[Michael Marcotte (Chair)]: general's purview, under the Consumer Protection

[Herb Olson (Member)]: But they don't have I don't think that AG has the authority to

[Unidentified Committee Member]: No.

[Maria Royle (Legislative Counsel)]: You actually just reminded me. Because the attorney general has broad investigative authority under any of the consumer protections in chapter 63, including the rules. So presumably, if they felt

[Herb Olson (Member)]: They first yeah. Question to them

[Maria Royle (Legislative Counsel)]: I would confirm whether

[Herb Olson (Member)]: they need, say, some sort of reason to believe that a violation has occurred before they conduct an investigation for whether they they have the ability to just sort of periodically, you know, a

[Michael Marcotte (Chair)]: compliant with luck. I'd say that a few complaints that Yeah. You know, this third party debt collector, Reeves, told them its course that you're still pushing. Yeah. They could. So we will ask the attorney general That would be great. In that discussion. So I think what's before us now is the two instances that, you know, do we remove the phrase that talks about evidence and just leave it at determination? And the other is, you know, we have three options there.

[Emily Carris Duncan (Member)]: Where's the section on the evidence?

[Unidentified Committee Member]: Page. Page. It's in It's five eleven.

[Michael Marcotte (Chair)]: 15 pips d, subsection d, including to remove the phrase including identification of the evidence relied upon.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: What about if we had description of the evidence you relied upon?

[Michael Marcotte (Chair)]: I'm saying you gotta be careful that if they're relying on some evidence that they've found that this is fraud that it's fraudulent,

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

[Michael Marcotte (Chair)]: really don't want them giving the evidence Right.

[Herb Olson (Member)]: We just have any discussion about that? Okay, so the point about whether the regulator has any authority to proactively go out, I think, I mean, that makes a difference to me in terms of whether that phrase was in there, including identification, the evidence about who was confident that somebody had the ability to go out and say, Wait, did you really have Let's pull some random files here and see if you had a good basis. I'd be more comfortable deleting that phrase, but that would make me uncomfortable if people didn't have that.

[Michael Marcotte (Chair)]: I think it sounds like, at least on the stateside, that DFR would have that authority.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: And It would depend on Whether the lender was a state chartered institution or not. There'd be

[Emily Carris Duncan (Member)]: many if not.

[Michael Marcotte (Chair)]: Yeah. Then you also

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: For the record, Joe Valenti, Director of Policy at the Embark.

[Michael Marcotte (Chair)]: But you also work with the FDIC and NCUA when they come in for examinations as well.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: If it is a federally chartered institution, our authorities are implementing that.

[Michael Marcotte (Chair)]: Right, but there is cooperation between the and FDIC and NCUA.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: There is, but there's limits to what we can do for Sure. One that's not

[Michael Marcotte (Chair)]: But there could be that discussion with the federal regulators that we have this law, take a look and make sure that they're doing their due diligence when it comes to court staff.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Yes, and you might also run into an issue for non depository lenders, online lenders and the like, who we may or may not be able

[Herb Olson (Member)]: to examine.

[Michael Marcotte (Chair)]: And who regulates that? If inside of our purging, is the Fed?

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: They should, most of them should be registering license with us. I'm just thinking about edge cases here where we may not cover the entirety of the market.

[Herb Olson (Member)]: But wouldn't they be a licensed lender? Wouldn't they have to be a licensed lender in order to affirm that function, and would you have the examination authority of their licensed lenders from that?

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: If it's a license letter, yes, that makes sense.

[Michael Marcotte (Chair)]: And then I think based on PAG's broad authority for third party debt collectives, I think, I'm comfortable with removing it.

[Unidentified Committee Member]: Yeah. Me too.

[Michael Marcotte (Chair)]: Can you repeat what you just said? I said, based on just this conversation with state regulators, and they do work with the federal regulators where they can talk to the federal regulators and say, look at this. Also with the Attorney General of Broad Authority and then the Consumer Protection Act, I feel comfortable that they can actually take a look to see if there's things that are going on with a third party debt collector.

[Herb Olson (Member)]: While we're on the space, this this clause here, not sure if this is a this difference or a distinction, but when I look at good faith and that sort of concept, it's from perspective of the actor, not necessarily, and it might be entirely in good faith, but maybe it's not a reasonable kind of thing. And so I'm wondering whether some notion of it being a reasonable determination might be

[Michael Marcotte (Chair)]: a reasonable good faith basis.

[Anthony "Tony" Micklus (Member)]: I did a little bit of just sleuthing around on some of this. Good faith basis is defined one of the definitions is an honest, reasonable belief supported by some facts or law that your position, action, or statement is legitimate even if it later turns out to be wrong.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: So reasonable is in the definition.

[Herb Olson (Member)]: Yeah, that's the point of making sure that that reasonableness, it's somehow incorporated into the public sense of fairness.

[Unidentified Committee Member]: Yeah, do we, well, so I guess I just had a question. If we have a good faith basis, can it be a simple decline? Your application has been declined. Does that constitute a good faith basis? And if it doesn't, and we just clarify, does not mean a sentence of, a single sentence that declines the application or something like that. I'm just trying to put a little bit more feet on it if it's possible. But if it's unnecessary, I will.

[Anthony "Tony" Micklus (Member)]: The other thing that I found about this was in civil litigations, you can state the way it's described here, state sufficient facts in the complaint to make the claim plausible. Can we do something like that where he's not required to reveal some of that information? But, you know, I mean, the word I use is vaguely specific.

[Michael Marcotte (Chair)]: Sure how

[Unidentified Committee Member]: that works legally, but

[Jonathan Cooper (Member)]: Right. That topic can I ask? Maria, know you're busy looking for some things, I'm Good faces up a lot in VSA. It's a a really common phrase, which either is helpful to us or truly unhelpful to us. And I'm just curious in talking to legislative council, is that broadly understood? Or is it the kind of thing where over the years legislation has been tweaked, you know, to make explicit what was baked into what, you know, representative Micklus read to us, for example.

[Maria Royle (Legislative Counsel)]: So I don't know generally. I think it's probably one of those standards that depends on the context. Right? So and ultimately, if there's a dispute, it will be up to the courts to determine was there a good it's like a almost like a reasonableness standard. Right? It might

[Jonathan Cooper (Member)]: It's interest I mean, it's interesting to me that that phrase would come up so frequently, including in data broker security breach. That does not include good faith, but an office average is that that if it's if it's a sticky wicket, then we have made a mistake of having it show up 401 times in a statute search.

[Maria Royle (Legislative Counsel)]: I understand. Yeah.

[Jonathan Cooper (Member)]: But perhaps it's not best to keep awake at that. I

[Maria Royle (Legislative Counsel)]: think it would be enough to prevent just an arbitrary denial. Like, I can't imagine. I mean, there's no good faith investigation. You have to do an investigation. So if you haven't done any investigation, you just deny it, then I think you violate it. If there are any concerns and, you know, you wanna be more specific and include reasonable good faith, there's no harm in doing that.

[Michael Marcotte (Chair)]: Can you, over the break, touch base with Judge Donate and ask how the judiciary treats good faith basis.

[Maria Royle (Legislative Counsel)]: Yep, I can ask this As as

[Michael Marcotte (Chair)]: Jonathan has said, it's throughout the statutes, there must be case law on how judges determine that.

[Herb Olson (Member)]: But one of the fact, if we go in the direction of not including a requirement to include the identification of the evidence relied on, so, we're kind of relying on the AG or somebody else to follow-up on occasion to make sure that it is good faith. I think it would be important to have the creditor make a record somewhere, so that when the regulator is going back and taking a look at it, they have the information necessary to make, decide it, did they do a good job, or didn't they? Just giving you a bankers association, that's a given. I mean, of course we're gonna have to record it. We've gotta have something in

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: the file that's gonna be based on the on, we've gotta keep that in

[Herb Olson (Member)]: the bodies, we've gotta, you have the record retention statutes. I hear you, but I'm just thinking about a licensed lender, you know, that might be their business. If they're registered with if they're not registered with EFR and they're a licensed lender in Vermont, I think they're in violation. But if they're registered with EFR, they've got record retention statutes that they have to follow-up. Is not just federal record retention.

[Unidentified Committee Member]: Including identification of evidence relied upon, I'm not thrilled with just completely removing it. I think that there's some good to having more than just a you're denied letter. But I can also understand that there might be information that we shouldn't be providing and we've dropped reasonable multiple times in this conversation. Would it be something that we could do where the notice shall include reasonable you know, or sorry, include should not, whoops, including reasonable identification of evidence relied upon. This way it says, Hey, you really should provide as much as you can, but if you can't provide it because it's not good to provide it, it allows you the out, but it sets also an expectation that you should provide some sort of information. It's better than removing it, but it's also better than keeping it in as it is because I can understand the reasoning for it. Reasoning, reason, reason.

[Unidentified Committee Member]: The other thing that I was thinking, this may or may not solve your problem, is including identification of the evidence relied upon when fraud is not determined or when there is no reasonable something of fraud, reasonable possibility of fraud, something like that. Is there a way to Because there are cases when it won't reasonably put the lender in a compromised position. Something along those lines. But again, I don't know legally what we need or if this even makes sense.

[Emily Carris Duncan (Member)]: Would a way to back that down a little bit would be to find a rational justification, right? At least make your argument without necessarily giving all of the details. I don't know if that's even a construct that could be legalized, but something, if you made

[Anthony "Tony" Micklus (Member)]: a fractional justification to say, is loosely, this is why we came to this conclusion. I just want to remind, by the definition I've looked up here for good faith, honest, reasonable belief supported by some facts or law, that your position, action, or statement is legitimate. So, in a sense, the word good faith, reasonable, is already built in there.

[Michael Marcotte (Chair)]: Why don't we hear what Maria comes up with from Judge O'Nay? I think we need to understand how the judiciary and case law determines what would fit the and don't we can sit here for the next two or three hours and keep going around in that. It would be a

[Unidentified Committee Member]: safe afternoon.

[Michael Marcotte (Chair)]: Would wind up in the same place.

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

[Maria Royle (Legislative Counsel)]: mention this. So under the UCC in Vermont, there is a definition of good faith, and it means honesty in fact and the observance of reasonable commercial standards of fair dealing.

[Michael Marcotte (Chair)]: If it's a reasonable word. Anyways,

[Maria Royle (Legislative Counsel)]: I'll just leave you with that.

[Unidentified Committee Member]: And then you have a list of things.

[Michael Marcotte (Chair)]: I'm going to seek a list of things.

[Unidentified Committee Member]: I know.

[Maria Royle (Legislative Counsel)]: Email.

[Unidentified Committee Member]: It's only like two or three. So number two is my preference for, because we're doing rounds.

[Michael Marcotte (Chair)]: Yeah. So

[Unidentified Committee Member]: I definitely would prefer the, you you can continue debt collecting, but you can't transfer, you can't sell.

[Michael Marcotte (Chair)]: Think that Oh, let's let's take one thing at a time. Okay. Where is everybody at three options we have?

[Anthony "Tony" Micklus (Member)]: So we're switching gears. Yes. Because I think we'll Okay.

[Michael Marcotte (Chair)]: We'll get more information about Got that was I I think what we Yeah. Just just read us from the UCC is I I let's let's hear what did you share. I just need to turn from that. So the next fifty seconds, people are able to fill which option.

[Anthony "Tony" Micklus (Member)]: I mean, I'm uncomfortable with option two. Agree. It's kind of that middle ground.

[Unidentified Committee Member]: As somebody who had a mortgage sold three times in five years, I like option two and the stability it would afford as well.

[Michael Marcotte (Chair)]: I

[Emily Carris Duncan (Member)]: think I

[Jonathan Cooper (Member)]: think option two.

[Unidentified Committee Member]: I don't have a clear decision at this point. Can't, from all three of them, like I said. I mean, do think it's important to prohibit transferability just because this does seem to be some sort of disputed type of debt, and it seems like there's gonna be work on more categories. So I don't think it should be able to be transferred.

[Herb Olson (Member)]: I would caveat that I wanna make sure the DEG really does have the authority to deal with that issue of whether those determinations are made properly, good faith, would be number two would be okay with me. But I need a little more information, I think, about how that other section that we've just been talking about is constructed, plus some real good assurances from the Attorney General's office that they can proactively, maybe on a regular basis, try to figure out whether it's being compliant.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Second one on that, Emily and Herb. I

[Emily Carris Duncan (Member)]: think I could be okay with number two. Yeah, I have mixed feelings just because I do hear that the debtor is going to be, so now they're back in being collected really at that point, their only possible thing is to go to court, right? To rectify that and recognizing that folks in that situation don't have much work. Opportunity assets or necessarily skill set to do so. So I do worry that they're going to get left behind. I could live with it.

[Unidentified Committee Member]: Yeah, understanding that we'd be the eighth state to put this in place. There's not a lot of information nationwide. There's some, but not a lot on how this impacts lending institutions and people who are victims, could live with starting with two and watching what happens in the state, and hopefully down the road, making it much easier for victims in these situations, and even better supporting victims in many more ways than this. That's really fine. This I see as a small first step, but it's a first step. That's a good thing.

[Michael Marcotte (Chair)]: So for now, it's option two. So remember, we have a report that we'll get from DFR. And, you know, it talks about other relevant parties to consult with besides bankers and credit unions. But maybe we ask the DFR to also consult with legal aid so that we're the Vermont's domestic what was it called? Domestic finance.

[Unidentified Committee Member]: And his network.

[Michael Marcotte (Chair)]: So he had both truth and the report that the entire consultant has done as well, which will give us a better idea of just what the banks and credit unions and financial institutions are doing, and also what the legal agency seeing and what the policy policy that they're seeing too.

[Unidentified Committee Member]: I think the report right now only is on transactional so we might modify that a little bit to get more information

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: and use maybe the the

[Michael Marcotte (Chair)]: can and the credit unions provide that information, you can collect that, but you'd love them. Yeah, they're not gonna receive Yeah,

[Unidentified Committee Member]: like three years after it goes into effect seems like a reasonable amount of time to make great care of them.

[Michael Marcotte (Chair)]: I wouldn't

[Herb Olson (Member)]: mind seeing in that Well, maybe we can get some

[Michael Marcotte (Chair)]: preliminary information every Like, it's a year or six months, we'd probably we start the preliminary report side.

[Unidentified Committee Member]: But

[Maria Royle (Legislative Counsel)]: doesn't this affect at 2028?

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: We it's not going into okay. So that should help. Or You can make it a fast bit sooner so we can report to us.

[Michael Marcotte (Chair)]: I mean, can we do up the reporting? You

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

[Unidentified Committee Member]: I

[Michael Marcotte (Chair)]: was supposed to affect on December, if that makes sense, or that two siblings? Just for a preliminary. Michael?

[Unidentified Committee Member]: Alright. So do want to make sure that the Fair Debt Collection Practice Act or whatever Vermont has is set up so that if you receive a letter of cease and desist, no more letters, no more phone calls, no more communications because that puts it into this nebulous area where if the debtor wants to get rid of it off their credit, they have to take it to court. If the banker wants to collect the money, they have to take it to court. Because I was under the impression that if you send that letter, cease and desist, they don't contact you anymore.

[Michael Marcotte (Chair)]: I think what we'll do as well, because we've already talked about bringing

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: The attorney general.

[Michael Marcotte (Chair)]: The attorney general, but also having Rick come in and talk to us about the Vermont version of that so that we have a good understanding of and Rick needs to well, we're way following up on that because he's not very familiar with it on the Vermont version of it. So when we come back, he'll give us that information of what is in current statute then. It just for me, I

[Unidentified Committee Member]: would like to see that. If it's not, I would

[Michael Marcotte (Chair)]: like to see that in the bill. We can certainly talk about it.

[Unidentified Committee Member]: Yeah.

[Michael Marcotte (Chair)]: We have to see what's in there for you.

[Unidentified Committee Member]: No. I I I and I get that. I just wanna I'm just concerned that it's not. And if it isn't certain to think that putting that in there is

[Michael Marcotte (Chair)]: good work on that. Okay. So I think we determined the path forward. We'll have to be more questioning soon to come back. So we'll take it up then Tuesday if we come back, and we're waiting for judiciary is also to work on the air to speak with for that to because they don't take their any close you know, completed on this, so we'll finish it. But I don't think anything else, Ed.

[Jonathan Cooper (Member)]: Anybody would like to sign on to the resolution pertaining to the fifteenth anniversary of the future of disaster, I'll need to

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: know by 05:00.

[Jonathan Cooper (Member)]: Can I send you all the draft of the line, which we've worked up with Michael Chernyk? So just take a peek and let me know.

[Michael Marcotte (Chair)]: Alright. Well, it's a wrap. Everybody have a good week off. Get recharged. Things are gonna get hectic for the first two or three weeks that we're back. We have a lot of work to do today. Exciting. So with that, I think we can