Recently, largely due to emerging payment systems and new ways of conducting business online, there has been a trend developing among states that certain activity does not require money transmitter licensing. For example, several states have amended their statutes or issued regulatory guidance to indicate that a license is not needed if an entity is acting as an “agent of the payee” or as a “payment processor,” so long as certain conditions are met. In general, an agent of the payee is an entity that has a contractual relationship with the merchant or other ultimate payee such that payment to that entity constitutes, in effect, final payment. New York, for example, describes it as “any person authorized by a payee to receive funds on behalf of the payee and to deliver such funds received from the payor to the payee.” N.Y. Comp. Codes R. & Regs. tit. 3, § 406.2(l).
In a recent consent order, Vermont has indicated it will not join this trend. State regulators determined that “a technology platform [that] provide[s] an e-commerce marketplace that enables users to buy and sell items online on the platform and offers stored value accounts for platform users” was required to have a license under Vermont law. That was because, according to the consent order, the company was “accepting funds from buyers and transmitting those funds to sellers” and/or was “issuing stored value.” The consent order states point blank: “Vermont does not exempt a payment processor or an agent of a payee from licensure.”
There is not yet any indication that other states will follow Vermont’s lead. But many states have yet to conclusively indicate how their money transmitter law applies to particular players, such as agents of a payee or payment processors. Payments industry participants should carefully analyze their compliance obligations going forward and take care that any approach accounts for varying applications of these laws.