NYC Comptroller Calls For Strengthening City, State Consumer Protection Laws, Regulations

Accusing the Trump Administration of “dismantling” the CFPB, New York City Comptroller Brad Lander is calling on city and state officials to fill the void by strengthening consumer protection laws and rules in the city and state.

“The Trump Administration’s dismantling of the Consumer Financial Protection Bureau (CFPB)—including the elimination of 90 percent of its staff—will leave millions of Americans more vulnerable to unfair, deceptive, and abusive business practices from lenders and financial institutions of all types,” the comptroller’s office said in releasing a new report. The report “demands that State and City leaders close regulatory and enforcement gaps, increase banking access and affordability, and expand consumer rights, engagement, and outreach.”

The report said that during the past decade, the CFPB has been instrumental in expanding access to safe, affordable credit and banking services. That has ended, according to Lander.

“These rollbacks mean state and city governments around the country must take a larger role in defending American consumers,” the comptroller’s office said.

New York, Lander asserted, has one of the weakest consumer protection statutes in the nation.

The comptroller’s office said that existing gaps in city and state consumer protection policy, coupled with severely weakened federal oversight, leave New Yorkers especially vulnerable to harm. “While the State and City cannot replace the CFPB, there are, as this report demonstrates, a variety of opportunities for New York to better protect its residents from financial exploitation,” Lander’s office said, in summarizing the report.

While the city and state have strong foundations of consumer protection through the State’s Department of Financial Services and the City’s Department of Consumer and Worker Protection, “the law governing it is among the weakest consumer protection statutes in the country, and legal loopholes enable ultra-high-cost lenders to evade state usury law, trapping consumers in cycles of debt,” according to the comptroller’s office.

Lander said that most states ban unfair deceptive acts or practices, while New York only bans deceptive acts or practices. In addition, according to Lander, New York is one of seven states where consumers must prove impact on the public—not just harm to the individual consumer– in order to pursue legal action.

At the state level, New York can significantly strengthen consumer protection by enacting legislation to modernize its consumer protection law, regulate Earned Wage Access and other high-cost lending products, address barriers to bank accessibility among marginalized groups, and improve financial data privacy protections, among other proposals, according to Lander.

Specifically, Lander released a long list of recommendations, including:

• Gov. Kathy Hochul signing the FAIR Business Practices Act legislation, which would revise the state’s consumer protection law to include both unfair and deceptive business acts or practices. The legislation also would make it clear that the consumer protection law applies to small businesses and non-profits and to residential property transactions. The FAIR Act would also give power to the state attorney general’s office to bring action against any person or business operating in New York, regardless of whether they are located in New York. Currently, the consumer protection law sets fines at $50 per violation; the FAIR Act would increase that fine to $1000 for each violation, in addition to actual damages, with additional damages awarded if the defendant is found to have “willingly or knowingly” violated the Act. The state legislature recently passed the bill; it is awaiting the governor’s signature.
• Provide full funding for the Office of the Attorney General, NY State Department of Financial Services and NYC Department of Consumer and Worker Protection to probe and take action against harmful practices and protect local consumers.
• Create a statewide Consumer Protection Restitution Fund to collect a portion of civil consumer penalties to compensate consumers who otherwise cannot receive restitution.
• Enact the Department of Financial Services regulation limiting overdraft fees at state-chartered banks.
•  Improve statewide legislation to expand access to banks among underserved populations.
• Provide targeted support for minority depository institutions and credit unions operating in underserved communities.
• Pass legislation to regulate ultra-high-cost lenders, while rejecting legislative efforts to merely licensing them without protecting consumers against business practices.

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 municipal and 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.