Download this document in MS Word 97 format

NO. 55. AN ACT RELATING TO THE PROVISION OF MONEY SERVICES AND FUNDED SETTLEMENTS AT REAL ESTATE CLOSINGS.

(S.200)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec 1. 8 V.S.A. chapter 79 is added to read:

CHAPTER 79. Money Services

Subchapter 1. General Provisions

§ 2500. DEFINITIONS

The definitions in section 11101 of this title shall apply to this chapter, unless the context clearly indicates otherwise. As used in this chapter, the following terms shall have the following meanings:

(1) "Applicant" means a person that files an application for a license under this chapter.

(2) "Authorized delegate" means a person that a licensee designates to provide money services on behalf of the licensee.

(3) "Check cashing" means receiving at least $500.00 compensation within a 30-day period for taking payment instruments or stored value, other than traveler’s checks, in exchange for money, payment instruments, or stored value delivered to the person delivering the payment instrument or stored value at the time and place of delivery without any agreement specifying when the person taking the payment instrument will present it for collection.

(4) "Currency exchange" means receipt of revenues equal to or greater than five percent of total revenues from the exchange of money of one government for money of another government.

(5) "Licensee" means a person licensed under this chapter.

(6) "Limited station" means private premises where a check casher is authorized to engage in check cashing for no more than two days of each week solely for the employees of the particular employer or group of employers specified in the check casher’s license application.

(7) "Mobile location" means a vehicle or a movable facility where check cashing occurs.

(8) "Monetary value" means a medium of exchange, whether or not redeemable in money.

(9) "Money" means a medium of exchange that is authorized or adopted by the United States or a foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments.

(10) "Money services" means money transmission, check cashing, or currency exchange.

(11) "Money transmission" means to engage in the business of selling or issuing payment instruments, selling or issuing stored value, or receiving money or monetary value for transmission to a location within or outside the United States.

(12) "Outstanding," with respect to a payment instrument, means issued or sold by or for the licensee and which has been reported as sold but not yet paid by or for the licensee.

(13) "Payment instrument" means a check, draft, money order, traveler’s check, or other instrument for the transmission or payment of money or monetary value, whether or not negotiable. The term does not include a credit card voucher, letter of credit, or instrument that is redeemable by the issuer in goods or services.

(14) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, or any other legal or commercial entity.

(15) "Principal equity owner" means any person (or group of persons acting in concert) who owns or controls 25 percent or more of any class of equity interest in the applicant.

(16) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium, and is retrievable in perceivable form.

(17) "Responsible individual" means an individual who is employed by a licensee and has principal, active managerial authority over the provision of money services by the licensee in this state.

(18) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(19) "Stored value" means monetary value that is evidenced by an electronic record.

(20) "Unsafe or unsound practice" means a practice or conduct by a person licensed to engage in money transmission or an authorized delegate of such a person which creates the likelihood of material loss, insolvency, or dissipation of the licensee’s assets, or otherwise materially prejudices the interests of its customers.

§ 2501. EXCLUSIONS

This chapter does not apply to:

(1) the United States or a department, agency, or instrumentality thereof;

(2) the sale or issuance of payment instruments or stored value, or money transmission, by the United States Postal Service, or by a contractor on behalf of the United States Postal Service;

(3) a state, county, city, or any other governmental agency or governmental subdivision within a state;

(4) a financial institution as defined in subdivision 11101(32) of this title, a financial institution holding company as defined in subdivision 11101(33) of this title, a credit union, an office of an international banking corporation, a branch of a foreign bank, a corporation organized pursuant to the Bank Services Company Act, or a corporation organized under the Edge Act under the laws of a state or the United States if the person does not issue, sell, or provide payment instruments or stored value through an authorized delegate that is not such a person;

(5) electronic funds transfer of governmental benefits for a federal, state, or governmental agency by a contractor on behalf of the United States or a department, agency, or instrumentality thereof, or a state or governmental subdivision, agency, or instrumentality thereof;

(6) a board of trade designated as a contract market under the Commodity Exchange Act or a person that, in the ordinary course of business, provides clearance and settlement services for a board of trade to the extent of its operation as or for such a board of trade;

(7) a registered futures commission merchant under the federal commodities laws to the extent of its operation as such a merchant;

(8) a person that provides clearance or settlement services pursuant to a registration as a clearing agency or an exemption from such registration granted under the federal securities laws to the extent of its operation as such a provider;

(9) an operator of a payment system that provides processing, clearing, or settlement services, between or among persons excluded by this section or licensees, in connection with wire transfers, credit card transactions, debit card transactions, stored-value transactions, automated clearing house transfers, or similar funds transfers to the extent of its operation as such;

(10) a person registered as a securities broker-dealer under federal or state securities laws to the extent of its operation as such a broker-dealer;

(11) the sale or issuance of stored value by a school to its students and employees; or

(12) a seller of goods or services that cashes payment instruments incidental to or independent of a sale and does not charge for cashing the payment instrument.

§ 2502. LICENSE REQUIRED

(a) A person shall not engage in money transmission without:

(1) obtaining a license under subchapter 2 of this chapter; or

(2) being an authorized delegate of a person licensed under subchapter 2 of this chapter.

(b) A person shall not engage in check cashing or currency exchange without:

(1) obtaining a license under subchapter 3 of this title;

(2) obtaining a license for money transmission under subchapter 2 of this chapter; or

(3) being an authorized delegate of a person licensed under subchapter 2 of this chapter.

(c) A person not licensed under this chapter or not an authorized delegate of a licensee is engaged in providing money services if the person advertises those services, solicits to provide those services, or holds itself out as providing those services.

(d) A license is not transferable or assignable.

(e) A licensee shall file with the commissioner any name proposed to be used in connection with a money service business or location pursuant to this chapter. The commissioner shall not approve a proposed name if the commissioner determines that the name may be misleading or likely to confuse the public, or deceptively similar to any name in use in this state.

Subchapter 2. Money Transmission Licenses

§ 2505. LICENSE REQUIRED

A person licensed under this subchapter or that is an authorized delegate of a person licensed under this subchapter may engage in money transmission and may also engage in check cashing or currency exchange without obtaining a separate license under subchapter 3 of this chapter.

§ 2506. APPLICATION FOR LICENSE

(a) As used in this section, "material litigation" means any litigation that according to generally accepted accounting principles is deemed significant to an applicant’s or a licensee’s financial health, and would be required to be disclosed in the applicant’s or licensee’s annual audited financial statements, report to shareholders, or similar records.

(b) A person applying for a license under this subchapter shall do so in a form and in a medium prescribed by the commissioner. The application shall state or contain:

(1) the legal name and residential and business addresses of the applicant and any fictitious or trade name used by the applicant in conducting its business;

(2) a list of any criminal convictions of the applicant and any material litigation in which the applicant has been involved in the ten-year period next preceding the submission of the application;

(3) a description of any money services previously provided by the applicant and the money services that the applicant seeks to provide in this state;

(4) a list of the applicant’s proposed authorized delegates, and the locations in this state where the applicant and its authorized delegates propose to engage in money transmission or provide other money services;

(5) a list of other states in which the applicant is licensed to engage in money transmission or provide other money services and information concerning any bankruptcy or receivership proceedings affecting the licensee, and any license revocations, suspensions, or any criminal or disciplinary action taken against the applicant in other states;

(6) a sample form of contract for authorized delegates, if applicable, and a sample form of payment instrument or instrument upon which stored value is recorded if applicable;

(7) the name and address of any financial institution through which the applicant’s payment instruments and stored-value obligations will be paid;

(8) a description of the source of money and credit to be used by the applicant to provide money services; and

(9) any other information the commissioner requires with respect to the applicant.

(c) If an applicant is a corporation, limited liability company, partnership, or other entity, the applicant shall also provide:

(1) the date of the applicant’s incorporation or formation, and state or country of incorporation or formation;

(2) if applicable, a certificate of good standing from the state or country in which the applicant is incorporated or formed;

(3) a brief description of the structure or organization of the applicant, including any parent or subsidiary of the applicant, and whether any parent or subsidiary is publicly traded;

(4) the legal name, any fictitious or trade name, all business and residential addresses, and the employment, in the ten-year period next preceding the submission of the application of each executive officer, manager, director of, or person that has control of, the applicant;

(5) a list of any criminal convictions, material litigation or disciplinary actions in which any executive officer, manager, director of, or individual in control of, the applicant has been involved in the ten-year period next preceding the submission of the application;

(6) a copy of the applicant’s audited financial statements for the most recent fiscal year and, if available, for the two-year period next preceding the submission of the application;

(7) a copy of the applicant’s unconsolidated financial statements for the current year, whether audited or not, and, if available, for the two-year period next preceding the submission of the application;

(8) if the applicant is publicly traded, a copy of the most recent 10-K report filed with the United States Securities and Exchange Commission;

(9) if the applicant is a wholly-owned subsidiary:

(A) a copy of audited financial statements for the parent corporation for the most recent fiscal year; and

(B) of a corporation publicly traded in the United States, a copy of the parent corporation’s most recent 10-K report filed with the United States Securities and Exchange Commission, or if the applicant is a wholly-owned subsidiary of a corporation publicly traded outside the United States, a copy of similar documentation filed with the regulator of the parent corporation’s domicile outside the United States;

(10) if the applicant is a corporation, the name and address of the applicant’s registered agent in this state; and

(11) any other information the commissioner requires with respect to the applicant.

(d) A nonrefundable application fee of $1,000.00 and a license fee of $500.00 shall accompany an application for a license under this subchapter. The license fee shall be refunded if the application is denied.

(e) The commissioner may waive one or more requirements of subsections (b) and (c) of this section, or permit an applicant to submit substituted information in lieu of the required information.

§ 2507. SECURITY

(a) Except as otherwise provided in subsection (b) of this section, the following rules apply:

(1) A surety bond, letter of credit, or other similar security acceptable to the commissioner of not less than $100,000.00 shall accompany an application for a license.

(2) If an applicant proposes to provide money services at more than one location through authorized delegates or otherwise, the amount of the security shall be increased by $10,000.00 per location, not exceeding a total of $500,000.00.

(b) The commissioner may increase the amount of security required to a maximum of $2,000,000.00 based upon the financial condition of a licensee, as evidenced by reduction of net worth, financial losses, or other relevant criteria.

(c) Security shall be in a form satisfactory to the commissioner, and payable to the state for use of the state and for the benefit of any claimant against the licensee and its authorized delegates to secure the faithful performance of the obligations of the licensee and its authorized delegates with respect to money transmission.

(d) The aggregate liability on a surety bond may not exceed the principal sum of the bond. A claimant against a licensee or its authorized delegate may maintain an action directly against the bond, or the commissioner may maintain an action on behalf of the claimant against the bond. The power vested in the commissioner by this subsection shall be in addition to any other powers of the commissioner under this chapter.

(e) A surety bond shall cover claims effective for as long as the commissioner specifies, but for at least five years after the licensee ceases to provide money services in this state. However, the commissioner may permit the amount of security to be reduced or eliminated before the expiration of that time to the extent the amount of the licensee’s payment instruments or stored-value obligations outstanding in this state is reduced. The commissioner may permit a licensee to substitute another form of security acceptable to the commissioner for the security effective at the time the licensee ceases to provide money services in this state.

(f) In lieu of the security prescribed in this section, an applicant for a license or a licensee may provide security in a form otherwise permitted by the commissioner.

§ 2508. ISSUANCE OF LICENSE

(a) Upon the filing of an application under this subchapter, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the applicant, and any person named in the application. The commissioner may conduct an on-site investigation of the applicant, the cost of which the applicant shall bear in accordance with section 18 of this title. The commissioner shall issue a license to an applicant under this subchapter if the commissioner finds that all of the following conditions have been fulfilled:

(1) the applicant has complied with sections 2506, 2507, and 2510 of this title;

(2) the financial condition and responsibility, financial and business experience, competence, character, and general fitness of the applicant, and competence, experience, character, and general fitness of the executive officers, managers, and directors of, and persons in control of the applicant indicate that it is in the interest of the public to permit the applicant to engage in money transmission; and

(3) the applicant has paid the requisite application and license fees.

(b) The commissioner shall approve or deny an application for an original license within 60 days after a complete application is filed, and notify the applicant of the decision in a record. The commissioner for good cause may extend the review period.

(c) An applicant whose application is denied by the commissioner may request that the commissioner reconsider the application by making such request in writing, within 15 days of the denial, responding specifically to the commissioner’s stated reason or reasons for denial. The commissioner shall then reconsider the application in light of the response stated in the request for reconsideration. Within 60 days of filing the request, upon findings as set forth in subsection (a) of this section, the commissioner shall issue the license.

(d) If the commissioner is unable to make findings as set forth in subsection (a) of this section, the commissioner shall not issue a license. Within 60 days of filing of the request for reconsideration, the commissioner shall notify the applicant of the denial, and return to the applicant the bond and the sum paid by the applicant as a license fee, retaining the application fee to cover the costs of investigating the application. The applicant may request review by the superior court in Washington County upon action brought in the usual form by an aggrieved party, within 15 days after written notice of the denial of the request for reconsideration.

§ 2509. RENEWAL OF LICENSE AND ANNUAL REPORT

(a) A licensee under this subchapter shall pay an annual license renewal fee of $500.00 no later than December 1 for the next succeeding calendar year.

(b) A licensee under this subchapter shall submit an annual report, on or before May 1 for the preceding calendar year, in a form and in a medium prescribed by the commissioner. The annual report shall state or contain:

(1) a copy of the licensee’s most recent audited annual financial statement or, if the licensee is a wholly-owned subsidiary of another corporation, the most recent audited consolidated annual financial statement of the parent corporation or the licensee’s most recent audited consolidated annual financial statement;

(2) the number of payment instruments and stored-value obligations sold by the licensee in this state that have not been previously included in an annual report, the monetary amount of those instruments, and the monetary amount of those instruments currently outstanding;

(3) a description of each material change in information submitted by the licensee in its original license application that has not been previously reported to the commissioner on any required report;

(4) a list of the licensee’s permissible investments and a certification that the licensee continues to maintain permissible investments according to the requirements set forth in sections 2540 and 2541 of this title;

(5) proof that the licensee continues to maintain adequate security as required by section 2507 of this title;

(6) a list of the locations in this state where the licensee or an authorized delegate of the licensee engages in money transmission or provides other money services; and

(7) any other information the commissioner may require.

(c) If a licensee does not file an annual report on or before May 1, or pay its renewal fee by December 1, or within any extension of time granted by the commissioner, the commissioner shall send the licensee a notice of suspension. The licensee’s license shall be suspended ten calendar days after the commissioner sends the notice of suspension. The licensee has 20 days after its license is suspended in which to file an annual report or pay the renewal fee, plus $100.00 for each day after suspension that the commissioner does not receive the annual report or the renewal fee. The commissioner for good cause may grant an extension of the due date of the annual report or the renewal date.

(d) The commissioner may require more frequent reports from any licensee for the purpose of determining the adequacy of the licensee’s security.

§ 2510. NET WORTH

A licensee under this subchapter shall maintain a net worth of at least $100,000.00, determined in accordance with generally accepted accounting principles.

Subchapter 3. Check Cashing and Currency Exchange

§ 2515. CHECK CASHING AND CURRENCY EXCHANGE LICENSES REQUIRED

(a) A person licensed under this subchapter may engage in check cashing and currency exchange.

(b) A person licensed under subchapter 2 of this chapter may engage in check cashing and currency exchange without first obtaining a separate license under this subchapter.

(c) An authorized delegate of a person licensed under subchapter 2 may engage in check cashing and currency exchange without first obtaining a license under this subchapter if such money services are within the scope of activity permissible under the contract between the authorized delegate and the licensee.

§ 2516. APPLICATION FOR LICENSE

(a) A person applying for a license under this subchapter shall do so in a form and in a medium prescribed by the commissioner. The application shall state or contain:

(1) the legal name and residential and business addresses of the applicant, if the applicant is an individual and, if the applicant is not an individual, the name of each partner, executive officer, manager, director and principal equity owner and the business address of the applicant;

(2) the location of the principal office of the applicant;

(3) complete addresses of other locations in this state where the applicant proposes to engage in check cashing or currency exchange, including all limited stations and mobile locations;

(4) a description of the source of money and credit to be used by the applicant to engage in check cashing services and currency exchange; and

(5) other information the commissioner requires with respect to the applicant.

(b) A nonrefundable application fee of $500.00 and a license fee of $500.00 shall accompany an application for a license under this subchapter. The license fee shall be refunded if the application is denied.

§ 2517. ISSUANCE OF LICENSE

(a) Upon the filing of an application under this subchapter, the commissioner shall investigate the applicant’s financial condition and responsibility, financial and business experience, character, and general fitness. The commissioner may conduct an on-site investigation of the applicant, the cost of which the applicant shall bear in accordance with section 18 of this title. The commissioner shall issue a license to an applicant under this subchapter if the commissioner finds that all of the following conditions have been fulfilled:

(1) the applicant has complied with section 2516 of this title;

(2) the financial condition and responsibility, financial and business experience, competence, character, and general fitness of the applicant, and competence, experience, character, and general fitness of the executive officers, managers, directors of, and persons in control of the applicant indicate that it is in the interest of the public to permit the applicant to engage in check cashing and currency exchange; and

(3) the applicant has paid the requisite application and license fees.

(b) The commissioner shall approve or deny an application for an original license within 60 days after a complete application is filed, and notify the applicant of the decision in a record. The commissioner, for good cause, may extend the review period.

(c) An applicant whose application is denied by the commissioner may request that the commissioner reconsider the application by making such request in writing, within 15 days of the denial, responding specifically to the commissioner’s stated reason or reasons for denial. The commissioner shall then reconsider the application in light of the response stated in the request for reconsideration. Within 60 days of filing the request, upon findings as set forth in subsection (a) of this section, the commissioner shall issue the license.

(d) If the commissioner is unable to make findings as set forth in subsection (a) of this section, the commissioner shall not issue a license. Within 60 days of filing of the request for reconsideration, the commissioner shall notify the applicant of the denial, and return to the applicant the sum paid by the applicant as a license fee, retaining the application fee to cover the costs of investigating the application. The applicant may request review by the superior court in Washington County upon action brought in the usual form by an aggrieved party within 15 days after written notice of the denial of the request for reconsideration.

§ 2518. RENEWAL OF LICENSE AND ANNUAL REPORT

(a) A licensee under this subchapter shall pay an annual license renewal fee of $500.00 no later than December 1 for the next succeeding calendar year.

(b) A licensee under this subchapter shall submit an annual report, on or before May 1 for the preceding calendar year, in a form and in a medium prescribed by the commissioner. The annual report shall state or contain:

(1) a description of each material change in information submitted by the licensee in its original license application that has not been previously reported to the commissioner on any required report;

(2) a list of the locations in this state where the licensee engages in check cashing or currency exchange, including limited stations and mobile locations; and

(3) any other information the commissioner may require.

(c) If a licensee does not file an annual report on or before May 1, or pay its renewal fee by December 1, or within any extension of time granted by the commissioner, the commissioner shall send the licensee a notice of suspension. The licensee’s license shall be suspended ten calendar days after the commissioner sends the notice of suspension. The licensee has 20 days after its license is suspended in which to file an annual report or pay the renewal fee, plus $100.00 for each day after suspension that the commissioner does not receive the annual report or the renewal fee. The commissioner for good cause may grant an extension of the due date of the annual report or the renewal date.

§ 2519. activities OF CHECK CASHERS AND CURRENCY EXCHANGERS

(a) Check cashing.

(1) A licensee, in every location conducting business under a license issued pursuant to this chapter, shall conspicuously post and at all times display a notice stating all fees charged. A licensee shall file with the commissioner a statement of the fees charged at every location licensed for services offered there.

(2) Before a licensee shall deposit, with any financial institution, a payment instrument that is cashed by a licensee, each such item shall be endorsed with the actual name under which such licensee is doing business. Additionally, the words "Licensed Check Cashing Business" must be written legibly or stamped immediately after or below the name of the endorser.

(3) A licensee shall comply with all applicable federal statutes governing currency transaction reporting.

(4) A licensee may not alter or delete any information on any payment instrument cashed.

(5) A licensee shall issue a receipt for each check cashing transaction upon request. The receipt shall include, among other matters the licensee may desire to include, the amount of the payment instrument and the total fee charged.

(6) A licensee shall not impose any fee or other charge for bad checks other than as expressly permitted under the provisions of sections 2311 and 2312 of Title 9.

(7) Within ten business days after being advised by the payor financial institution that a payment instrument has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity, the licensee shall notify the police department in the city or town where the payment instrument was cashed. If a payment instrument is returned to the licensee by the payor financial institution for any of the aforementioned reasons, the licensee may not release or destroy the payment instrument without the consent of the city or town police department, or other investigative law enforcement authority.

(8) No licensee shall issue coupons, gift certificates or tokens to be used in lieu of money when cashing a payment instrument.

(9) No licensee shall require the customer to receive payment by a method which causes the customer to pay additional or further fees and charges to the licensee or other person, and no licensee shall charge or receive any other charges or fees in addition to the fees listed in this chapter.

(10) A licensee shall pay to every customer tendering a payment instrument to be cashed the entire face amount of such instrument in cash, less any charges permitted by this section, on the same date upon which such instrument is presented to the licensee.

(11) A licensee is prohibited from requiring that a customer cash two or more separate checks in a manner to avoid the limitations on the fees as set forth in this section.

(12) No check casher shall:

(A) charge check cashing fees, except as otherwise provided in this chapter, in excess of five percent of the face amount of the payment instrument or $5.00, whichever is greater;

(B) charge check cashing fees in excess of three percent of the face amount of the payment instrument, or $2.00, whichever is greater, if such payment instrument is the payment of any kind of state public assistance or federal Social Security benefit, if the customer cashing the payment instrument is the named payee of such payment instrument; or

(C) charge check cashing fees for personal checks or money orders in excess of ten percent of the face amount of the personal check or money order or $5.00, whichever is less.

(13) No licensee shall agree to hold a payment instrument for later deposit. No licensee shall cash or advance any money on a postdated payment instrument.

(14) Licensees may charge a customer with a one-time membership fee not to exceed $10.00.

(b) Currency exchange:

(1) The rate of exchange and fees charged by a licensee for rendering currency exchange services shall be prominently displayed to the public at each business location; and

(2) Licensees shall provide each customer with a written receipt sufficient to identify the transaction, the licensee, the rate of exchange, the fees charged and the amount of currency exchanged.

Subchapter 4. Authorized Delegates

§ 2525. RELATIONSHIP BETWEEN LICENSEE AND AUTHORIZED DELEGATE

(a) In this subchapter, "remit" means to make direct payments of money to a licensee or its representative authorized to receive the money, or to deposit money in a depository institution within the meaning of subdivision 11101(24) of this title, in an account specified by the licensee.

(b) A contract between a licensee and an authorized delegate shall require the authorized delegate to operate in full compliance with this chapter. The licensee shall furnish in a record to each authorized delegate policies and procedures sufficient to permit compliance with this chapter.

(c) An authorized delegate shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate.

(d) If a license is suspended, revoked or nonrenewed, the commissioner shall notify all authorized delegates of the licensee whose names are in a record filed with the commissioner of the suspension, revocation, or nonrenewal. After notice is sent or publication is made, an authorized delegate shall immediately cease to provide money services as a delegate of the licensee.

(e) An authorized delegate may not provide money services outside the scope of activity permissible under the contract between the authorized delegate and the licensee, except for activity in which the authorized delegate is otherwise licensed or authorized to engage.

(f) An authorized delegate of a licensee holds in trust for the benefit of the licensee all money less fees earned from money transmission.

(g) A person shall not provide money services on behalf of a person not licensed under this chapter. A person that engages in any money services activity under this chapter shall be subject to the provisions of this chapter to the same extent as if the person were a licensee under this chapter.

Subchapter 5. Examinations; Reports; Records

§ 2530. AUTHORITY TO CONDUCT EXAMINATIONS and INvestigationS

(a) The commissioner may examine any person at any time the commissioner determines it is prudent for the protection of the residents of this state. The cost of such examination shall be borne by the licensee or by any person examined that is subject to this chapter or is required to be licensed under this chapter, in accordance with section 18 of this title.

(b) Information obtained during an examination or investigation under this chapter shall be confidential and privileged, and shall be treated as provided in section 23 of this title.

§ 2531. JOINT EXAMINATIONS

(a) The commissioner may conduct an on-site examination of records listed in section 2534 of this title in conjunction with representatives of other state agencies or agencies of another state or of the federal government. Instead of an examination, the commissioner may accept the examination report of an agency of this state or of another state or of the federal government or a report prepared by an independent certified public accountant.

(b) A joint examination or an acceptance of an examination report does not preclude the commissioner from conducting an examination as provided by law. A joint report or a report accepted under this subsection is an official report of the commissioner for all purposes.

§ 2532. REPORTS

(a) A licensee shall file with the commissioner within 30 business days any material changes in information provided in a licensee’s application as prescribed by the commissioner.

(b) A licensee shall file with the commissioner within 60 days of any change in the list of authorized delegates, responsible individuals, or locations in this state where the licensee or an authorized delegate of the licensee provides money services, including limited stations and mobile locations. Such notice shall state the name and street address of each authorized delegate or of each location removed or added to the licensee’s list. Upon any such change, the licensee shall provide sufficient evidence that it is in compliance with section 2507 of this title.

(c) A licensee shall file a report with the commissioner within 15 business days after the licensee has reason to know of the occurrence of any of the following events:

(1) the filing of a petition by or against the licensee under the United States bankruptcy code for bankruptcy or reorganization;

(2) the filing of a petition by or against the licensee for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or the making of a general assignment for the benefit of its creditors;

(3) the commencement of a disciplinary proceeding against its license in a state or country in which the licensee engages in business or is licensed;

(4) the cancellation or other impairment of the licensee’s bond or other security;

(5) a charge or conviction against the licensee or of any of the executive officers, partners, members, managers, and principal equity owners of, or person in control of, the licensee for a felony related to the provision of money services; or

(6) a charge against or conviction of an authorized delegate for a felony related to the provision of money services.

§ 2533. CHANGE OF CONTROL

(a) A licensee shall give the commissioner notice in a record of a proposed change of control within 30 days after learning of the proposed change of control, and request approval of the acquisition. A licensee shall also submit with the notice a nonrefundable fee of $500.00.

(b) After review of a request for approval under subsection (a) of this section, the commissioner may require the licensee to provide additional information concerning the proposed persons in control of the licensee. The additional information shall be limited to the same categories of information required of the licensee or persons in control of the licensee as part of its original license or renewal application.

(c) The commissioner shall approve a request for change of control under subsection (a) of this section if, after investigation, the commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to operate the licensee or person in control of the licensee in a lawful and proper manner, and that the interests of the public will not be jeopardized by the change of control.

(d) The commissioner shall approve or deny a request for change of control within 60 days after a complete request is filed and notify the licensee of the decision in a record. The commissioner for good cause may extend the review period.

(e) The following persons are exempt from the prefiling requirements of subsection (a) of this section, but the licensee shall notify the commissioner of the change of control and request the commissioner’s approval using the standards in subsection (b) of this section for a change of control:

(1) a person that acts as a proxy for the sole purpose of voting at a designated meeting of the security holders or holders of voting interests of a licensee or person in control of a licensee;

(2) a person that acquires control of a licensee by devise or descent;

(3) a person that acquires control as a personal representative, custodian, guardian, conservator, or trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; and

(4) a person that the commissioner, by rule or order, exempts in the public interest.

(f) Subsection (a) of this section does not apply to public offerings of securities.

(g) Before filing a request for approval to acquire control, a person may request in a record a determination from the commissioner as to whether the person would be considered a person in control of a licensee upon consummation of a proposed transaction. If the commissioner determines that the person would not be a person in control of a licensee, the commissioner shall enter an order to that effect, and the proposed person and transaction is not subject to the requirements of subsections (a) through (c) of this section.

§ 2534. RECORDS

(a) A licensee shall maintain records for determining the licensee’s compliance with this chapter. A licensee shall maintain the following for at least five years:

(1) a record of each payment instrument or stored-value obligation sold;

(2) a general ledger posted at least monthly containing all asset, liability, capital, income, and expense accounts;

(3) bank statements and bank reconciliation records;

(4) records of outstanding payment instruments and stored-value obligations;

(5) records of each payment instrument and stored-value obligation paid within the five-year period;

(6) a list of the last known names and addresses of all of the licensee’s authorized delegates; and

(7) any other records the commissioner requires by rule.

(b) The items specified in subsection (a) of this section may be maintained in any form of a record as permitted in subsection 11301(c) of this title.

(c) The licensee shall keep, use in the licensee’s business, and make available to the commissioner upon request, such books, accounts, records, and data compilations as will enable the commissioner to determine whether such licensee is complying with the provisions of this chapter and with the rules and regulations lawfully made by the commissioner hereunder.

(d) All records maintained by the licensee as required in subsections (a) through (c) of this section are open to inspection by the commissioner pursuant to section 2530 of this title.

§ 2535. MONEY LAUNDERING REPORTS

(a) A licensee and an authorized delegate shall file with the commissioner copies of all reports required by federal currency reporting, record keeping, and suspicious transaction reporting requirements as set forth in 31 U.S.C. Section 5311, 31 C.F.R. Part 103, and other federal and state laws pertaining to money laundering.

(b) The timely filing of a complete and accurate report required under subsection (a) of this section with the appropriate federal agency is compliance with the requirements of subsection (a) of this section, unless the commissioner notifies the licensee that reports of this type are not being regularly and comprehensively transmitted by the federal agency to the commissioner.

Subchapter 6. Permissible Investments

§ 2540. MAINTENANCE OF PERMISSIBLE INVESTMENTS

(a) A licensee shall maintain at all times permissible investments that have a market value computed in accordance with generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments and stored-value obligations issued or sold and money transmitted by the licensee or its authorized delegates.

(b) The commissioner, with respect to any licensee, may limit the extent to which a type of investment within a class of permissible investments may be considered a permissible investment, except for money and certificates of deposit issued by a depository institution within the meaning of subdivision 11101(24) of this title. The commissioner, by rule, may prescribe or by order allow other types of investments that the commissioner determines to have a safety substantially equivalent to other permissible investments.

(c) Permissible investments, even if commingled with other assets of the licensee, are held in trust for the benefit of the purchasers and holders of the licensee’s outstanding payment instruments and stored-value obligations in the event of bankruptcy or receivership of the licensee.

§ 2541. TYPES OF PERMISSIBLE INVESTMENTS

(a) Except to the extent otherwise limited by the commissioner pursuant to section 2540 of this title, the following investments are permissible under section 2540 of this title:

(1) cash, a certificate of deposit, or senior debt obligation of a depositary institution within the meaning of subdivision 11101(24) of this title;

(2) a banker’s acceptance or bill of exchange that is eligible for purchase upon endorsement by a member bank of the Federal Reserve System and is eligible for purchase by a Federal Reserve Bank;

(3) an investment bearing a rating of one of the three highest grades as defined by a nationally-recognized organization that rates securities;

(4) an investment security that is an obligation of the United States or a department, agency, or instrumentality thereof; an investment in an obligation that is guaranteed fully as to principal and interest by the United States; or an investment in an obligation of a state or a governmental subdivision, agency, or instrumentality thereof;

(5) receivables that are payable to a licensee from its authorized delegates, in the ordinary course of business, pursuant to contracts which are not past due or doubtful of collection, if the aggregate amount of investments in receivables under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not have at one time investments in receivables under this subdivision in any one person aggregating more than ten percent of the licensee’s total permissible investments; and

(6) a share or a certificate issued by an open-end management investment company that is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et. seq.), and whose portfolio is restricted by the management company’s investment policy to investments specified in subdivisions (1) through (4) of this subsection.

(b) The following investments are permissible under section 2540 of this title, but only to the extent specified:

(1) an interest-bearing bill, note, bond, or debenture of a person whose equity shares are traded on a national securities exchange or on a national over-the-counter market, if the aggregate of investments under this subdivision do not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have investments under this subdivision in any one person aggregating more than ten percent of the licensee’s total permissible investments;

(2) a share of a person traded on a national securities exchange or a national over-the-counter market or a share or a certificate issued by an open-end management investment company that is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940, and whose portfolio is restricted by the management company’s investment policy to shares of a person traded on a national securities exchange or a national over-the-counter market, if the aggregate of investments under this paragraph does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have investments under this subdivision in any one person aggregating more than ten percent of the licensee’s total permissible investments;

(3) a demand-borrowing agreement made to a corporation or a subsidiary of a corporation whose securities are traded on a national securities exchange, if the aggregate of the amount of principal and interest outstanding under demand-borrowing agreements under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have principal and interest outstanding under demand-borrowing agreements under this subdivision with any one person aggregating more than ten percent of the licensee’s total permissible investments; and

(4) any other investment the commissioner determines to be permissible, to the extent specified by the commissioner.

(c) The aggregate of investments under subsection (b) of this section may not exceed 50 percent of the total permissible investments of a licensee calculated in accordance with section 2540 of this title.

Subchapter 7. Enforcement

§ 2545. SUSPENSION, REVOCATION AND NONRENEWAL; RECEIVERSHIP

(a) The commissioner may revoke, suspend or not renew a licensee’s license, or place a licensee in receivership, or order a licensee to revoke the designation of an authorized delegate, if the commissioner finds that:

(1) the licensee violates this chapter or a rule adopted or an order issued under this chapter;

(2) the licensee does not cooperate with an examination or investigation by the commissioner;

(3) the licensee engages in fraud, intentional misrepresentation, or gross negligence;

(4) an authorized delegate is convicted of a violation of a state or federal anti-money-laundering statute, or violates a rule adopted or an order issued under this chapter, as a result of the licensee’s knowing misconduct or neglect;

(5) the competence, experience, character, or general fitness of the licensee, authorized delegate, person in control of a licensee, or responsible person of the licensee or of the authorized delegate indicates that it is not in the public interest to permit the person to provide money services;

(6) the licensee engages in an unsafe or unsound practice;

(7) the licensee has demonstrated a pattern of failure or refusal to promptly pay obligations on payment instruments or transmissions of money, is insolvent, suspends payment of its obligations, or makes an assignment for the benefit of its creditors;

(8) the licensee does not remove an authorized delegate after the commissioner issues and serves upon the licensee a final order including a finding that the authorized delegate has violated this chapter;

(9) any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying such application;

(10) the licensee fails to maintain any required security under section 2507 of this title, or fails to maintain its minimum net worth as required by section 2510 of this title; or

(11) the licensee has made any material false representation to the commissioner in any application or report filed with the commissioner.

(b) In determining whether a licensee is engaging in an unsafe or unsound practice, the commissioner may consider the volume and condition of the licensee’s money services business, the magnitude of the loss, the gravity of the violation of this chapter, and the previous conduct of the person involved.

(c) The licensee shall receive 15 days’ notice and an opportunity to be heard before such order shall be issued. Mailing notice by certified mail to the licensee’s current address as stated on the license shall be presumptive evidence of its receipt by the licensee. However, if the commissioner finds that the public safety or welfare imperatively requires emergency action, action with no prior notice or prior opportunity to be heard may be taken, pending proceedings for revocation or other action.

§ 2546. Termination or suspension of authorized

DELEGATE activity

(a) The commissioner may issue an order suspending or barring any authorized delegate or any responsible individual, director, officer, member, manager, partner or principal equity owner of such authorized delegate, from continuing to be or becoming an authorized delegate of any licensee during the period for which such order is in effect, or may order that an authorized delegate cease and desist in any specified conduct, if the commissioner finds that:

(1) the authorized delegate has violated this chapter or applicable state or federal law or a lawful order of the commissioner under this chapter;

(2) the authorized delegate does not cooperate with an examination or investigation by the commissioner;

(3) the authorized delegate engages in fraud, intentional misrepresentation, or gross negligence;

(4) the authorized delegate is convicted of any act involving fraud or dishonesty;

(5) the competence, experience, character, or general fitness of the authorized delegate or a person in control of the authorized delegate indicates that it is not in the public interest to permit the authorized delegate to provide money services;

(6) the authorized delegate is engaging in an unsafe or unsound practice; or

(7) the authorized delegate is convicted of a violation of a state or federal anti-money-laundering statute.

(b) In determining whether an authorized delegate is engaging in an unsafe or unsound practice, the commissioner may consider the volume and condition of the authorized delegate’s provision of money services, the magnitude of the loss, the gravity of the violation of this chapter, and the previous conduct of the authorized delegate.

(c) Any authorized delegate or other person to whom an order is issued under this section may apply to the commissioner to modify or rescind such order. The commissioner shall not grant such application unless the commissioner finds that it is in the public interest to do so, and that it is reasonable to believe that such person will, if and when such person is permitted to resume being an authorized delegate of a licensee, comply with all applicable provisions of this chapter and of any regulation or order issued under this title.

(d) The authorized delegate shall receive 15 days’ notice and an opportunity to be heard before such order shall be issued. Mailing notice by certified mail to the authorized delegate’s current address as stated on the license shall be presumptive evidence of its receipt by the authorized delegate. The licensee shall be sent, by certified mail, copies of all notices sent to any of its authorized delegates pursuant to this section. However, if the commissioner finds that the public safety or welfare imperatively requires emergency action, action with no prior notice or prior opportunity to be heard may be taken, pending proceedings for suspension or other action. Upon issuance of a suspension or bar order, the licensee shall terminate its relationship with such authorized delegate according to the terms of the order.

§ 2547. ORDERS TO CEASE AND DESIST

(a) If the commissioner determines that a violation of this chapter or of a rule adopted or an order issued under this chapter by any person is likely to cause immediate and irreparable harm to a licensee, its customers, or the public as a result of the violation, or cause insolvency or significant dissipation of assets of any person, the commissioner may issue an order requiring such person to cease and desist from the violation. The order becomes effective upon service of it upon such person.

(b) The commissioner may issue an order against any person to cease and desist from providing money services through an authorized delegate that is the subject of a separate order by the commissioner.

(c) An order to cease and desist remains effective and enforceable pending the completion of an administrative proceeding pursuant to this subchapter.

(d) Any person that is served with an order to cease and desist may petition the superior court of Washington county for a judicial order setting aside, limiting, or suspending the enforcement, operation, or effectiveness of the order pending the completion of an administrative proceeding pursuant to this subchapter.

(e) The commissioner shall commence an administrative proceeding pursuant to this subchapter within ten days after issuing an order to cease and desist.

§ 2548. ADMINISTRATIVE PENALTIES

(a) The commissioner may assess an administrative penalty against any person that violates this chapter or a rule adopted or an order issued under this chapter in an amount not to exceed $1,000.00 per day for each day the violation continues, plus the state’s costs and expenses for the investigation and prosecution of the matter, including reasonable attorney’s fees.

(b) The powers vested in the commissioner by this chapter shall be in addition to any other powers to enforce any penalties, fines or forfeitures authorized by law.

§ 2549. CRIMINAL PENALTIES

It shall be a criminal offense, punishable by a fine of not more than $10,000.00 or imprisonment of not more than three years, or both, for any person to intentionally make a false statement, misrepresentation, or false certification in a record filed or required to be maintained under this chapter, or to intentionally make a false entry or omit a material entry in such a record, or to knowingly engage in any activity for which a license is required under this chapter without being licensed under this chapter.

§ 2550. ADMINISTRATIVE PROCEDURES

All administrative proceedings under this chapter shall be conducted in accordance with chapter 25 of Title 3 and any regulations promulgated by the department on hearing procedure.

§ 2551. HEARINGS

Except as otherwise provided in subsections 2509(c) and 2518(c) and sections 2546 and 2547 of this title, the commissioner may not suspend or revoke a license, place a licensee in receivership, issue an order to cease and desist, suspend or revoke the designation of an authorized delegate, or assess a civil penalty without notice and an opportunity to be heard.

Subchapter 8. Conservation, Liquidation and Insolvency

§ 2555. CONSERVATION, LIQUIDATION AND INSOLVENCY

To the extent applicable, the provisions of subchapters 2, 3, and 5 of chapter 209 of this title, excluding sections 19207, 19208, 19210, 19306, and 19307, shall apply to the conservation, liquidation and insolvency of any licensee under this chapter. Such licensee shall be treated as a financial institution for the purposes of application of those subchapters. If an impaired or insolvent licensee is or becomes a debtor in bankruptcy or the subject of a bankruptcy proceeding under federal law, the commissioner shall be relieved of any obligation otherwise imposed under this section and subchapters 2, 3, and 5 of chapter 209 of this title, and shall relinquish control of the assets and estate of such debtor to the duly appointed trustee in bankruptcy or the debtor in possession, as the case may be.

Sec. 2. 9 V.S.A. chapter 4, subchapter 3 is added to read:

Subchapter 3. Funded Settlements

§ 201. Definitions

As used in this subchapter:

(1) "Disbursement of loan funds" means the delivery of the loan funds by the lender to the settlement agent in one or more of the following forms:

(A) cash;

(B) wired funds or electronic transfer;

(C) certified check;

(D) checks issued by a governmental entity or instrumentality;

(E) cashier’s check, or teller check or any transfer of funds by check or otherwise that is fully collected and unconditionally available to the settlement agent;

(F) checks or other drafts issued by a state-chartered or federally-chartered financial institution; checks or other drafts issued by a state-chartered or federally-chartered credit union; and

(G) checks issued by an insurance company licensed in the state of Vermont.

(2) "Disbursement of the settlement proceeds" means the payment of all proceeds of the transaction by the settlement agent to the persons or accounts designated to receive the proceeds.

(3) "Lender" means any person who is in the business of making loans secured by a mortgage on real estate and to whom the debt is initially payable on the face of the loan documents.

(4) "Loan closing" means the time a borrower executes any loan document or becomes contractually obligated on a credit transaction, whichever occurs sooner.

(5) "Loan documents" means the note evidencing the debt due the lender, the mortgage securing the debt due the lender, and any other documents required by the lender to be executed by the borrower as part of the transaction.

(6) "Loan funds" means the proceeds of the loan to be disbursed by the lender to others at closing.

(7) "Settlement" means the time when the settlement agent has received the loan funds, loan documents and other documents and funds to carry out the terms of the contract between the parties, and the settlement agent reasonably determines that all conditions of such contracts have been satisfied. "Parties", as used in this subdivision, means the seller, purchaser, borrower, lender and settlement agent.

(8) "Settlement agent" means the person responsible for conducting the settlement and disbursement of the settlement proceeds, and includes an individual, corporation, partnership or other entity conducting the settlement and disbursement of the settlement proceeds. The lender may be the settlement agent.

§ 202. APPLICABILITY

This subchapter applies only to transactions involving loans made by lenders, which loans are secured by a first lien on owner-occupied one-to-four-unit residential real estate, including first and second homes.

§ 203. DUTY OF LENDER

(a) The lender shall, at or before the loan closing, cause disbursement of loan funds to the settlement agent; however, in the case of a refinancing, or any other loan where a right of rescission applies but has not been exercised, the lender shall, prior to two p.m. Eastern Standard Time of the first business day after the expiration of the rescission period required under the federal Truth-in-Lending Act (15 U.S.C. § 1601 et seq.), cause disbursement of loan funds to the settlement agent.

(b) If the lender is acting as settlement agent, the lender shall cause disbursement of the settlement proceeds at the loan closing, or, for any other loan where a right of rescission applies, the lender shall cause disbursement of the settlement proceeds on the first business day after the expiration of the rescission period.

(c) The lender shall not be entitled to receive or charge any interest on the loan until disbursement of the settlement proceeds.

§ 204. DUTY OF SETTLEMENT AGENT THAT IS NOT A LENDER

A settlement agent that has received the loan funds from the lender shall cause disbursement of settlement proceeds at the loan closing, or, for any other loan where a right of rescission applies, the settlement agent shall cause disbursement of the settlement proceeds on the first business day after the expiration of the rescission period.

§ 205. Commissioner’s Powers

(a) The commissioner may:

(1) impose an administrative penalty of not more than $1,000.00 for each violation upon any person who violates or participates in the violation of this subchapter, or any lawful regulation or order issued thereunder;

(2) order any person to make restitution to any person injured as a result of a violation of this subchapter; and

(3) order any person to cease and desist in any specified conduct.

(b) The powers vested in the commissioner by this subchapter shall be in addition to any other powers to enforce any penalties, fines or forfeitures authorized by law.

§ 206. Consumer Remedies

(a) A lender or settlement agent who violates any provision of this subchapter and causes actual damage to a consumer is subject to a civil action by the aggrieved consumer in which the consumer has the right to recover the greater of actual damages in an amount determined by the court or, except as provided in subsection (b) of this section, an amount determined by the court of not less than $250.00 nor more than $1,000.00, plus costs of the action, together with reasonable attorney’s fees.

(b) Liability under subsection (a) of this section is limited to actual damages, plus costs of the action, together with reasonable attorney’s fees, if the lender or settlement agent shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.

(c) An action may not be brought pursuant to this section more than two years after the loan closing has occurred.

Sec. 3. 8 V.S.A. § 23 is added to read:

§ 23. CONFIDENTIALITY OF INVESTIGATION AND EXAMINATION REPORTS

(a) This section shall apply to all persons licensed, authorized or registered, or required to be licensed, authorized or registered, under Parts 2 and 5 of Title 8.

(b) Regardless of source, all records of investigations, including information pertaining to a complaint by or for a consumer, and all records and reports of examinations by the commissioner, whether in the possession of a supervisory agency or another person, shall be confidential and privileged, shall not be made public, and shall not be subject to discovery or introduction into evidence in any private civil action. No person who participated on behalf of the commissioner in an investigation or examination shall be permitted or required to testify in any such civil action as to any findings, recommendations, opinions, results or other actions relating to the investigation or examination.

(c) The commissioner may, in his or her discretion, disclose or publish or authorize the disclosure or publication of any such record or report or any part thereof in the furtherance of legal or regulatory proceedings brought as a part of the commissioner’s official duties. The commissioner may, in his or her discretion, disclose or publish or authorize the disclosure or publication of any such record or report or any part thereof, to civil or criminal law enforcement authorities for use in the exercise of such authority’s duties, in such manner as the commissioner may deem proper.

(d) For the purposes of this section, records of investigations and records and reports of examinations shall include joint examinations by the commissioner and any other supervisory agency. Records of investigations and reports of examinations shall also include records of examinations and investigations conducted by:

(1) any agency with supervisory jurisdiction over the person; and

(2) any agency of any foreign government with supervisory jurisdiction over any person subject to the jurisdiction of the department, when such records are considered confidential by such agency or foreign government and the records are in the possession of the commissioner.

Sec. 4. 8 V.S.A. § 2201(c) is amended to read:

(c) No license shall be required of:

* * *

(9) lenders making only commercial loans of $1,000,000.00 or more; *[or

]*

(10) persons who loan an aggregate of less than $50,000.00 in any one year at rates of interest of no more than 12 percent per annum; or

(11) nonprofit institutions of higher education, exempt from taxation under Section 501(c)(3) of the Internal Revenue Code, that make residential mortgage loans to their employees from their own funds.

Sec. 5. EFFECTIVE DATES

Sec. 1 of this act shall take effect January 1, 2002. Sec. 2 of this act shall take effect July 1, 2001. This section and Secs. 3 and 4 of this act shall take effect upon passage.

Approved: June 12, 2001