As the Trump Administration attempts to drastically cut CFPB funding and staffing, New York regulators and legislators are attempting to fill what could be a void in consumer protection efforts.

 “We’re hiring,” Adrienne A. Harris, the state’s Superintendent of the Department of Financial Services, said during a presentation on March 12 at the Brookings Institution. She delivered a message to financial services professionals, “We welcome you.” Harris went on to tout her department’s work, saying that the NYDFS has taken 111 enforcement actions since she became superintendent in January, 2022.

A day later, the Department of Financial Services announced that it was hiring former CFPB Deputy Enforcement Director Gabriel O’Malley to head the agency’s Consumer Protection and Financial Enforcement Division. O’Malley left the CFPB in February, after more than a decade at the bureau.

The NYDFS has also been active on the regulatory front, having proposed its own overdraft rule governing state-chartered financial institutions earlier this year.

That rule, as outlined by Harris and the NYDFS would, among other things, prohibit:

  • Overdraft and NSF fees on overdrafts of less than $20.
  • Overdraft fees that exceed the overdrawn amount.
  • NSF fees than exceed the amount of the NSF transaction
  • More than three overdraft or non-sufficient funds (NSF) fees per consumer account per day.

The NYDFS is now soliciting comment on the proposed rule.

On the legislative front, on March 13 state Attorney General Letitia James announced the introduction of legislation, the Fostering Affordability and Integrity through Reasonable Business Practices Act (the FAIR Business Practices Act), that would expand the state’s ban on deceptive business practices to also protect against unfair and abusive practices. The Biden Administration’s former CFPB director and former FTC chair supported such efforts.

In announcing the legislation, James’s office said the legislation would “protect New Yorkers from a wide array of scams, including deed theft, artificial intelligence (AI)-based schemes, online phishing scams, hard-to-cancel subscriptions, junk fees, data breaches, and other unfair, deceptive, and abusive “practices. Forty-two other states and federal law already prohibit unfair practices, making New York’s current law both antiquated and inadequate.”

“The FAIR Business Practices Act would also help stop lenders, including auto lenders, mortgage servicers, and student loan servicers, from deceptively steering people into higher cost loans. It would reduce unnecessary and hidden fees, stop unfair billing practices by health care companies, and prevent companies from taking advantage of New Yorkers with limited English proficiency.”

The AG’s office specifically cited the federal rollback, in endorsing the legislation.

“At a time when the federal government is making life harder, we want to make life easier for New Yorkers,” James said.

In addition, Rohit Chopra, the CFPB director during the Biden Administration, called for enactment of the legislation. “With stronger laws on the books, Attorney General James and state law enforcement across the country can stop the scourge of junk fees and other crimes against consumers,” Chopra said.

Former FTC chair Lina Kahn echoed those sentiments.  “Strong consumer protection tools are essential for protecting Americans from unfair and abusive business practices,” she said. “At the FTC, we used these tools to tackle a range of exploitative tactics, from outrageous subscription traps and predatory scams to dangerous commercial surveillance. By passing a strong consumer protection bill, New York lawmakers can empower Attorney General James to fully defend New Yorkers’ pocketbooks, privacy, and economic freedoms.”

Ballard Spahr has a dedicated State Attorneys General Consumer Response Team that helps banks and other financial institutions understand and adapt to the evolving regulatory environment and mitigate risks in an era of heightened state-level enforcement.  Ballard Spahr brings an unmatched combination of experience to state attorney general (AG) enforcement matters.

The lawyers on our State Attorneys General Consumer Finance Response Team advise businesses and organizations to keep them well-prepared to meet current conditions and be ready for what lies ahead. If you have received a civil investigative demand (CID), subpoena, or inquiry from a state attorney general, or if you need guidance on state regulatory compliance, our team is available to assist. Please contact us to discuss your specific situation.