May 5, 2017

Vermont Licenses and Regulates Loan Solicitors Including Lead Generators

On May 1, 2017, Vermont Governor Phil Scott signed H. 182 which, among other things, regulates and licenses persons engaged in the business of "loan solicitation." The legislation captures activities that were largely unregulated in Vermont prior to the bill's enactment. The legislation became effective on May 1, 2017, except for provisions regarding loan solicitor and lead generator disclosure requirements that become effective on July 1, 2017.

For a person to engage in "loan solicitation" the person must, for compensation or gain, or with the expectation of compensation or gain:

  • offer, solicit, broker, directly or indirectly arrange, place, or find a loan for a prospective Vermont borrower;
  • engage in any activity intended to assist a prospective Vermont borrower in obtaining a loan, including lead generation;
  • arrange a loan through a third party through any method, including mail, telephone, internet, or any electronic means; or
  • advertise or cause to be advertised in Vermont a loan or any of the services described in the previous three bullets.

"Lead generation" means: (1) initiating consumer interest in a loan by online marketing, direct response advertising, telemarketing, or other similar consumer contact; (2) engaging in the business of selling leads for loans; (3) generating leads for other persons for, or with the expectation of, compensation or gain; or (4) referring Vermont borrowers to other persons for loans with the expectation of compensation or gain.

"Loan solicitation" does not apply to certain loans and persons. For example, residential mortgage loans are excluded from the loan solicitation provisions. In addition, the provisions do not apply when a seller of goods or services provides loan solicitation services in connection with financing the sale or proposed sale of the seller's goods or services as long as the seller is not compensated by the consumer for the loan solicitation services. If a person holds a lender, sales finance company, or mortgage broker license, the person is not required to obtain a separate loan solicitation license so long as they are acting on their own behalf.

Loan solicitation licensees must maintain a surety bond, include a specific disclosure in all advertisements of loans and solicitation of leads, observe record retention requirements, and file an annual report and financial statements with the Commissioner of Financial Regulation.

  H. 182