New NY Law Cracks Down On Deceptive Student Loan Servicers And Debt Collectors

New York’s new FAIR Business Practices Act gives state officials and individual borrowers stronger tools to sue student loan servicers and debt collectors that use unfair, deceptive, or abusive practices.​

What the new law does

• The Fostering Affordability and Integrity through Reasonable Business Practices Act (“FAIR Business Practices Act”) expands New York’s consumer‑protection law beyond just “deceptive” acts to also cover unfair and abusive conduct.​

• Both the Attorney General and harmed consumers can bring civil actions for penalties and restitution when businesses violate these standards.​

Practices now clearly targeted

• Student loan servicers that steer borrowers into the most expensive repayment options instead of affordable income‑driven plans are explicitly called out as a covered abusive practice.​

• Debt collectors that seize and keep Social Security benefits or other exempt income, especially from seniors, are also targeted, as are entities using misleading tactics to pursue debts without a valid legal basis.​

Who is protected and when

• The protections apply broadly to New Yorkers dealing with a wide range of businesses, including student loan servicers, debt collectors, car dealers, nursing homes, and health insurers.​

• The law was signed by Governor Kathy Hochul on December 20 and is scheduled to take effect 60 days later, meaning it will be in force starting February 2026.​

How this helps student loan borrowers

• Misconduct like pushing forbearance instead of explaining cheaper long‑term repayment options, misrepresenting loan forgiveness eligibility, or failing to correct known errors can now expose servicers to liability under state law in addition to any federal rules.​

• Borrowers who are misled or overcharged will be able to seek court‑ordered refunds, damages, and injunctions, while the Attorney General can pursue broader enforcement to stop systemic abuses.​

What you can do if affected

• Keep records of communications (emails, letters, call logs, screenshots) if a servicer or collector misrepresents your options, pressures you into an unaffordable plan, or withholds information.​

• You can file complaints with the New York Attorney General’s Office and the Department of Financial Services now, and once the Act is in force, you may also have a private right to sue for unfair, deceptive, or abusive practices tied to your loans or collections.​

The FAIR Business Practices Act prohibits student loan servicers from engaging in deceptive, unfair, or abusive acts or practices when dealing with borrowers.​

Key prohibited practices

• Deceptive practices remain banned, such as misrepresenting repayment options, fees, eligibility for forgiveness, or the consequences of nonpayment.

• Unfair practices are prohibited, defined as conduct that causes substantial injury that consumers cannot reasonably avoid and that is not outweighed by benefits to consumers or competition.

Abusive conduct aimed at servicers

• Abusive practices include materially interfering with a borrower’s ability to understand loan terms, costs, or conditions (for example, burying crucial information or using confusing disclosures).[]

• It is also abusive to take unreasonable advantage of a borrower’s lack of understanding of risks or costs, inability to protect their interests, or reasonable reliance on the servicer to act in their interests.

Examples specific to student loan servicers

• Steering borrowers into the most expensive repayment plans instead of affordable or income‑driven options is expressly cited as an abusive practice under the Act.

• Similar conduct likely covered includes pressuring borrowers away from beneficial programs, obscuring fees, or exploiting limited English proficiency or confusing pricing to increase revenue from student loans.