House committee reviews strike-all amendment to H.137 covering crypto kiosks, payroll exemptions and mortgage rate buy-downs

The House Committee on Commerce & Economic Development on Feb. 12 reviewed a draft strike‑all amendment to H.137, an omnibus bill addressing insurance product regulation, money‑transmission exemptions for small payroll processors, anti‑discrimination language for affordable housing, and a change to permit discount points on second mortgages.

The draft amendment was presented by Maria Royal of Legislative Council as a complete substitute for H.137. Royal told the committee the draft consolidates prior changes and highlights substantive edits, including new exemptions for payroll processors (section 15), a permitted‑charges change allowing discount points on certain loans (section 16), and movement of affordable‑housing nondiscrimination language into the state's unfair trade practices provisions.

The bill's legal risks for cryptocurrency vending machines — described in testimony as "virtual currency kiosks" — were flagged early in the hearing by Todd Dalos, assistant attorney general. Dalos said the kiosks operate in an "unregulated marketplace" and "present a tremendous risk to Vermonters," noting the attorney general's office has received numerous reports of crypto‑related fraud. He said an outright ban could raise legal challenges and that the office sees less risk in a moratorium that would allow time to develop a regulatory structure.

Chris Rice, a lobbyist with MMR representing the Independent Payroll Providers Association, and Robin Imbrogno, who represents the payroll‑processor trade groups, urged changes to the money‑transmission licensing language adopted last year so small local payroll firms could remain viable. Imbrogno said the licensing regime as originally drafted would likely force many small processors out of business because of compliance costs and licensing burdens. "The licensing requirements alone . . . would become and continue to become cost prohibitive for us to stay in business the way that we are," Imbrogno said, describing bank‑required SOC and NACHA audits, OFAC screening and annual financial disclosures.

Under the draft amendment's proposed exemption, an entity performing payroll services would be exempt from money‑transmission licensing if it meets several restrictive conditions intended to identify small processors: it does not provide payroll processing to any employer whose principal place of business is in Vermont; or it provides payroll processing to 25 or fewer Vermont employers; or it provides payroll processing to 500 or fewer employers overall and transmits payroll for fewer than 300 Vermont resident employees. The exemption also requires segregated accounts at federally insured institutions and a clean licensing and criminal history for key individuals.

Department of Financial Regulation (DFR) staff told the committee they worked with industry representatives to craft the de minimis language and support the amendment. An agency representative who identified himself as Aaron said the department "support[s]" the exemption language and described it as intentionally narrow so it only covers truly small processors. DFR also said the department supports moving the affordable‑housing nondiscrimination language into the unfair trade practices chapter to ensure it applies across admitted and surplus lines markets.

On mortgage policy, David Pfeiffer of Rocket Mortgage asked the committee to adopt language in section 16 that would permit borrowers to purchase discount points to lower the interest rate on subordinate (second‑lien) mortgages. Pfeiffer said the change "would quite simply allow Vermonters to buy down their rate if they choose to do so, on second mortgages." DFR staff told the committee they also support that change and said it aligns second‑lien practice with options already available for first mortgages.

Committee members asked for clarifications in several areas: how many payroll processors would be affected (DFR said it had not quantified exact counts), why the exemption uses the chosen numerical thresholds (industry and DFR reviewed census and market data), and whether moving the affordable‑housing language into the unfair‑practices section could make enforcement harder (DFR said the change is intended to clarify scope and be proactive given housing availability concerns).

No formal vote was recorded during the Feb. 12 session. Committee members indicated they would continue to refine the amendment and work with the attorney general's office, DFR and industry participants, and the sponsors signaled plans to circulate additional language on related items (including an unrelated Medicare/Medigap draft) for committee review.

The committee recessed without taking final action and scheduled follow‑up work sessions to finalize the amendment with stakeholders and staff before introducing it for bill traffic deadlines.

(Reporting note: quotes and attributions are taken from committee testimony and staff remarks during the Feb. 12 hearing.)