New York City Comptroller Brad Lander released a report titled “Standing Up for New York Consumers – How New York State and New York City can Strengthen Consumer Financial Protection in the Trump Era,” which called for the strengthening of local consumer financial protections in response to the Trump administration’s recent actions to reduce the regulatory footprint of the Consumer Financial Protection Bureau (CFPB or Bureau).
The CFPB was created as a response to the 2008 financial crisis and sought to protect consumers by “introduc[ing] landmark regulations targeting harmful practices across the consumer financial marketplace: from payday lending to overdraft and credit card fees, buy-now-pay-later products, data privacy, credit reporting, and prepaid accounts.” The Bureau’s enforcement activities have been significantly retracted as the Trump administration has sought to withdraw a wide swath of existing rules and guidance, and substantially reduced the headcount of its staff. Lander criticized the dismantling of the CFPB, asserting that it “protect[ed] millions from unchecked wrongdoing after decades of predatory lending and abusive business practices that created one of the worst economic crises in living memory.”
Lander’s report provides five areas that the state and local government can take action to fill the void left by the CFPB’s reduced oversight capabilities:
1. Regulatory and Enforcement Gaps
In contrast to many states that prohibit both abusive or deceptive acts or practices, New York’s consumer protection statutes currently only prohibit deceptive practices. Due to the elimination of the CFPB, Lander encourages state and local government to expand prohibited actions and develop new methods to support consumers, such as:
- Enacting the Fostering Affordability and Integrity through Reasonable Business Practices Act (A8427);
- Funding the attorney general’s office, the state’s Department of Financial Services (DFS), and the city’s Department of Consumer and Worker Protection (DCWP) to support increased enforcement; and
- Developing a “Consumer Protection Restitution Fund” to support those harmed by consumer protection violations.
2. Banking Access and Affordability
Lander supports expanding access to banking because some New York households do not utilize banks due to various fees, such as overdraft fees. The report encourages the New York legislature to introduce legislation aimed at increasing access to banking by:
- Adopting DFS’s proposed rules to limit fees at state banks by classifying certain overdraft fees and nonsufficient funds as unfair or deceptive and limiting such fees;
- Introducing and enacting legislation to increase banking access; and
- Increasing allocated funds for banking programs.
3. Nonbank Financial Products
Newly developed financial products remain a concern for Lander as these products are not required to strictly comply with regulations that are otherwise generally applicable to traditional consumer lending arrangements. According to Lander, the lack of regulation of nonbank financial products results in predatory lending practices. Lander suggested ways to protect New Yorkers, such as:
- Passing the End Loansharking Act (A4918/S1726) which would expand the attorney general’s authority and reclassify many nonbank financial products; and
- Requiring clear fee disclosures and prohibiting deceptive pricing methods.
4. Consumer Rights
In his report, Lander suggests that New York does not have legislation like other states, such as California and Oregon, which dictate how financial companies can use a consumer’s data. To protect consumer data rights amidst the CFPB’s plans of nullifying its data privacy rules, the report suggests:
- Improving privacy laws within the state to increase consumer data privacy rights; and
- Removing exemptions from having to comply with privacy protections for financial institutions.
5. Consumer Outreach and Engagement
Lander suggests that regulators and state and local government need to engage with and educate communities to ensure they are aware of state banking programs by:
- Developing a public consumer complaint database; and
- Developing outreach techniques to increase the public’s knowledge about more affordable banking options.
Why It Matters
State and local governments are reacting to the CFPB’s recent shift away from its last four years of aggressive oversight and enforcement of federal consumer protection laws, which has resulted in state-level action to strengthen enforcement powers. Companies doing business in New York now may face increased legal challenges at the state level, given heightened regulatory scrutiny and political pressure to increase oversight and bolster protections, especially as to emerging financial products (e.g., earned wage access and income share agreements), higher APRs, or involve small business lending. At this time, it is prudent for companies involved in nonbank lending and consumer financial services to implement enhanced consumer protection measures and focus resources into compliance systems. Companies should also anticipate increased scrutiny in other states as they follow the lead of New York and be ready to adapt business practices accordingly. With the likelihood of increased enforcement at the state level, it is crucial for companies to stay informed and prepared for potential changes in a complex legal landscape.
Troutman Pepper Locke State Attorneys General Team
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Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation. |
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Clay Friedman – Co-leader Clay co-leads the firm’s State Attorneys General practice and is nationally ranked by Chambers USA for AG Government Relations and in Best Lawyers for Advertising Law. He has dedicated his entire career to state attorney general and federal work, serving for nearly a decade in a senior role and more than 25+ years in private practice. Clay focuses his practice on helping industry-leading companies mitigate the risks associated with state and federal regulatory investigations and associated litigation. |
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Chris Carlson Chris advises clients on regulatory, civil, and criminal investigations and litigation. With a background as an assistant attorney general, he provides practical guidance to clients with matters involving state attorneys general and federal regulatory agencies. |
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Lauren Fincher Lauren has vast experience handling state attorneys general investigations, navigating complex regulatory compliance matters, and providing strategic counsel in enforcement actions across various industries. She helps clients manage high-stakes regulatory matters and guides them through complex legal landscapes. |
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Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, representing clients in single and multistate enforcement actions, including inquiries and investigations, as well as litigation involving state attorneys general and other state and federal governmental enforcement bodies. He has significant experience handling actions with federal agencies, including the CFPB and FTC, as well as single plaintiff and class action litigation for clients in highly regulated sectors such as financial services, health care, pharmaceutical, and education. |
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Michael Yaghi Mike handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation. |
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Samuel E. “Gene” Fishel Gene is a former regulator with two decades of experience who has overseen state privacy and cybersecurity regulation enforcement, led national, multistate attorneys general privacy investigations, and prosecuted computer crimes at the state and federal levels. He has served at the forefront of state attorney general and federal enforcement, and utilizes this experience to proficiently represent client interests. |
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Jay Myers Jay assists clients in heavily regulated industries, including health care, energy, insurance, emerging industries, and data privacy. He provides both regulatory legal advice and government relations strategies. Jay’s past and current clients include Fortune 10 companies, startups, nonprofits, industry associations, and advocacy groups. Recognizing that state government matters are often complex and multifaceted, he utilizes regulatory guidance, government advocacy, or both in tandem to deliver tailored solutions for each client’s unique needs. |
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Jessica Birdsong Jessica is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, magna cum laude, where she served as associate articles editor of the Journal of Law & Technology. |
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Blake R. Christopher Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries. |
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Nick Gouverneur Nick is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. He received his J.D. from the University of Illinois College of Law, where he served as a member of the Journal of Law, Technology & Policy. |
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Troy Homesley Troy is an accomplished litigator who has represented and defended clients across a wide range of complex, high-stakes disputes at both the trial and appellate levels. He has represented technology companies, business executives, law firms, investment funds, high-ranking federal officials, international non-profits, and asylum seekers. Troy draws on his broad litigation experience to advise clients before litigation arises, while claims are pending or threatened, and leading up to and through trial and appeals. |
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Natalia Jacobo Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based on the West Coast. She routinely counsels clients on a variety of state and federal regulatory matters, with a particular emphasis on consumer protection and data privacy matters. |
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Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. Nam’s experience transcends multiple industries, including financial services, telecommunications, media, and sports betting. |
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Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general. |
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Lane Page Lane specializes in federal and state regulatory investigations and complex civil litigation. He focuses on representing financial institutions and other businesses, with a particular emphasis on consumer protection and fair lending issues. |
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Dascher Pasco Dascher is an attorney within the Regulatory Investigations, Strategy, and Enforcement practice, based in the Richmond office. She joined our firm after working in personal injury and medical malpractice for a Virginia trial law firm. Dascher brings varied legal experience to the firm with strong litigation and regulatory strategy capabilities. |
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Kyara Rivera Rivera Kyara is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, cum laude, where she served as publications and online editor of the Public Interest Law Review. |
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Trey Smith Trey focuses his practice on representing and advising regulated utilities before state public utility commissions. He routinely helps clients obtain certificates of public convenience and necessity for transmission infrastructure. In this role, Trey works with his clients’ subject-matter experts to manage administrative proceedings, including by preparing initial filings; responding to discovery requests; drafting rebuttal testimony; and litigating any disputed issues. |
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Daniel Waltz Dan helps clients navigate all aspects highly regulated relationships between industry participants and federal, state and local governments. Whether engaging with regulators, negotiating transactions or representing clients in the courtroom, he delivers solutions that help his clients achieve their strategic goals. |
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Cole White Cole is a member of the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) group. He has a decade of experience working in the attorney general community, having joined the firm from the Wyoming Office of the Attorney General, where he was assistant attorney general. |
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Stephanie Kozol Stephanie is Troutman Pepper Locke’s senior government relations manager in the state attorneys general department. |