New York to toughen up laws to make up for weakened CFPB

New York is moving to strengthen consumer protections with new legislation aimed at preventing deceptive and abusive business practices. Attorney General Letitia James has introduced the FAIR Business Practices Act, which is being championed in the state legislature by Senator Leroy and Assembly member Micah Lasher. The proposed law seeks to modernize and expand the state's consumer protection laws, bringing them in line with those of most other states.

According to James, the current law, General Business Law §349, only prohibits deceptive acts, leaving consumers vulnerable to unfair and abusive business tactics. The FAIR Business Practices Act would address predatory lending, hidden fees, misleading subscription policies, deceptive healthcare billing, and online scams. It would also give the Attorney General's office greater authority to seek penalties against businesses that engage in these harmful practices.

One of the main goals of the bill is to prevent predatory lending practices used by auto lenders, mortgage companies, and student loan servicers. It would also regulate aggressive debt collection practices, especially those targeting seniors. Additionally, the legislation would require greater transparency in online transactions, protect consumers with limited English proficiency, and ensure fair business practices for small businesses.

Attorney General James emphasized the urgency of the bill, stating that many New Yorkers struggle with unfair business tactics, including confusing cancellation policies, deceptive loan agreements, and exploitative fees. She argued that the legislation would help prevent these issues and hold businesses accountable.

Several national and local experts have voiced support for the legislation. Former Federal Trade Commission Chair Lina Khan noted that stronger state protections are necessary to combat deceptive financial schemes. Rohit Chopra, a former head of the Consumer Financial Protection Bureau, highlighted the need for states to step up consumer protections amid declining federal oversight.

Senator Leroy Comrie stressed that the legislation is necessary to protect small businesses and working-class families, many of whom have fallen victim to unfair financial practices. Assemblymember Micah Lasher added that stronger consumer protections would directly contribute to affordability by ensuring that companies cannot take advantage of unsuspecting customers.

New York's consumer protection laws have not been significantly updated since 1970, even as digital fraud, hidden fees, and predatory financial tactics have evolved. Unlike 42 other states, New York currently lacks explicit prohibitions against unfair and abusive business practices. The FAIR Business Practices Act would address this gap by giving regulators stronger enforcement tools and ensuring consumers have legal recourse against unethical businesses.

The bill specifically targets several common predatory practices, including difficult-to-cancel subscriptions, car dealerships withholding customer identification until a deal is finalized, nursing homes suing family members for unpaid bills without legal basis, debt collectors improperly seizing Social Security benefits, and health insurance companies misleading patients about in-network coverage.

The legislation has been introduced in both the New York Senate and Assembly and is expected to be reviewed in committee before a full vote. Attorney General James has committed to advocating for its passage, arguing that stronger state-level protections are necessary as federal consumer safeguards weaken.

Offenses Under the FAIR Business Practices Act

1. Unfair, Deceptive, or Abusive Business Practices
   • Includes misleading advertisements, hidden fees, and deceptive contracts.
   • Covers financial institutions, subscription services, auto dealerships, and healthcare providers.
2. Failure to Provide Transparent Pricing and Fees
   • Businesses must clearly disclose all fees upfront.
   • Prohibits misleading or hidden charges, including junk fees in transactions.
3. Predatory Lending Practices
   • Student loan servicers, mortgage lenders, and auto loan providers are barred from steering borrowers into higher-cost repayment plans.
4. Hard-to-Cancel Subscriptions
   • Prohibits companies from making subscription cancellations overly complex or requiring excessive steps.
5. Debt Collection Abuses
   • Debt collectors are banned from unlawfully seizing protected government benefits, such as Social Security payments.
6. Nursing Home Debt Collection Scams
   • Prohibits nursing homes from suing family members of deceased residents for unpaid bills unless they are legally liable.
7. False or Misleading Claims About Health Insurance Coverage
   • Health insurers must accurately represent their network of in-network doctors and services.
8. Exploitation of Non-English Speakers
   • Businesses cannot use deceptive contracts or misleading terms that take advantage of consumers with limited English proficiency.
9. Failure to Notify Consumers of Data Breaches
   • Companies must disclose data breaches that could expose consumers to fraud or identity theft.

Penalties Under the FAIR Business Practices Act

1. Civil Penalties for Violations
   • Businesses found guilty of violating the law may face fines of up to $5,000 per violation.
   • If the violation is willful or occurs during an "abnormal market disruption" (such as during a natural disaster), the penalty increases to the greater of $15,000 or three times the value of restitution.
2. Restitution for Consumers
   • Consumers harmed by unfair or deceptive business practices can sue for:
     • $1,000 per violation in statutory damages.
     • Actual damages if the financial harm exceeds the statutory minimum.
     • Triple damages if the violation is found to be willful or knowing.
3. Attorney General’s Enforcement Powers
   • The Attorney General may seek injunctions to stop unlawful business practices.
   • Can initiate investigations, issue subpoenas, and take legal action against repeat offenders.
4. Additional Penalties for Offenses Against Vulnerable Populations
   • If the victim is a senior (65+), veteran, person with a disability, or non-English speaker, an additional penalty of $5,000 to $10,000 per violation applies.
5. Class Action Lawsuits
   • Consumers can file class action lawsuits for widespread violations, with total damages capped at $1 million or 2% of a business’s gross revenue, whichever is lower.
6. Failure to Report Violations
   • Companies that fail to comply with notice and reporting requirements may be fined $500 per day until they fulfill their obligations.