In remarks to the press and public on January 2, 2024, New York Governor Kathy Hochul announced “a sweeping consumer protection and affordability agenda”, including proposed actions to “strengthen consumer protections against unfair business practices” and “establish nation-leading regulations for the Buy Now Pay Later loan industry”.
The Governor vowed to pursue “the first major expansion to New York consumer protection laws since 1980” to curb “predatory” business practices and “exploitative tactics” that harm consumers, citing student loan servicers and debt collectors as examples of consumer financial services businesses that should be subjected to further legal constraints.
Governor Hochul also committed to seek “stronger regulatory guardrails” for Buy Now Pay Later (BNPL) transactions. BNPL transactions offer an alternative approach enabling customers to make online and other purchases without paying the full purchase price at the time of the transaction, typically allowing a customer to pay for a purchase in a small number of installments over a short period of time without a finance charge, but sometimes with a late fee if payments are missed. The press release accompanying the Governor’s remarks states:
“Governor Hochul will also propose legislation to require Buy Now Pay Later providers to get a license to operate in the state, and to authorize the New York State Department of Financial Services to propose and issue regulations for this rapidly growing industry. New Yorkers are increasingly turning to Buy Now Pay Later loans as a low-cost alternative to traditional credit products to pay for everyday and big-ticket purchases. This legislation and regulations will establish strong industry protections around disclosure requirements, dispute resolution and credit reporting standards, late fee limits, consumer data privacy, and guidelines to curtail dark patterns and debt accumulation and overextension.”
Following Governor Hochul’s comments, New York Attorney General Letitia James reiterated concerns about consumer industry segments that may treat customers unfairly, citing student loan marketers that she alleged steer borrowers to more expensive loans.
In her January 9, 2024 State of the State address to a joint session of the New York Senate and Assembly, Governor Hochul again promised to expand New York consumer protection laws in the coming year. We anticipate the Governor will push for enactment of two companion bills introduced in the New York legislature in 2023, either in the forms originally introduced or, as some news sources suggest, with updates to more fully cover the Governor’s 2024 agenda. As we discussed in detail in our blog at the time of their introduction, these two consumer and small business protection bills, A. 7138 and S. 795, would add prohibitions against unfair and abusive acts and practices, expand and create new private rights of action, and enhance the enforcement powers of the New York attorney general, among other provisions.
While these two bills remained pending at the time the New York legislature adjourned last year, they now have been referred to legislative committees once again: On January 3, 2024, A. 7138 was referred to the Assembly Codes Committee and S. 795 was referred to the Senate Consumer Protection Committee.
During her January 9th address, Governor Hochul also reiterated her call for legislation governing BNPL. Although she provided no further specifics about a possible BNPL statute in her comments, the Governor claimed that BNPL “often lures customers into spending beyond their means”, which may suggest a proposed requirement that BNPL providers must confirm the customer’s “ability to pay”.
We will continue to monitor and provide updates on material developments and the potential effects of this proposed legislation, as it may be introduced or amended. If enacted as introduced last year, we view these bills as farther reaching and more draconian even than Section 17200 of the California Business and Professions Code.