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Syracuse Post Standard
Opinion: NY must step up to protect consumers as feds step back
By Samuel Levine & Seth Frotman
Sam Levine is former director of the Federal Trade Commission’s Bureau of Consumer Protection. Seth Frotman is former general counsel and senior adviser to the director of the Consumer Financial Protection Bureau. They are based in Washington, D.C.
May 29, 2025 — It will come as no surprise to Syracuse that the global financial crisis did not begin with the collapse of Lehman Brothers, or with the meltdown in the stock market. It began house by house, mortgage by subprime mortgage, pushed by lenders who knew these loans would fail. And it began with the federal government turning a blind eye to this slow-motion crisis, actively encouraging subprime lending until it was too late.
We do not know if another crash is coming, but the warning signs are there. And instead of strengthening the guardrails, the Trump administration is taking a wrecking ball to them. The Consumer Financial Protection Bureau — created after the last crash to stop predatory lending before it spirals out of control — is under siege. The federal government is rolling back enforcement, defunding key agencies and making it easier for corporate giants to scam consumers.
Fortunately, states have their own consumer protection authorities, and it is critical they step up to protect their citizens. New York should be leading this effort, but it is missing a key weapon in its arsenal — a prohibition on practices that are unfair or abusive. To understand the importance of these tools, a brief history is in order.
In 1938, amid widespread concern about unscrupulous business practices, Congress passed legislation prohibiting unfair or deceptive conduct. Recognizing that bad actors are constantly finding new ways to cheat consumers, Congress made this law intentionally broad. The unfairness prong, as it was later understood, prohibited practices that caused unavoidable injury to consumers, while the deceptive prong prohibited practices that mislead. Over time, many states adopted similar tools, and often enforced them with more vigor than their federal counterparts. In 2007, for example, Massachusetts used its unfairness authority to challenge a subprime lender whose loans were designed to fail, successfully halting thousands of foreclosures. And it’s not only predatory financial practices that states can target with this tool. In recent years, states have sued Meta and TikTok for hooking young users on their platforms, an approach modeled on states’ successful efforts to stop the unfair marketing of cigarettes to teens in the 1990s.
Unlike the vast majority of states, however, New York does not prohibit unfair practices. Nor does New York prohibit abusive practices. The absence of these protections deprives New York of a critical tool and exposes its citizens to serious harm. But the good news is that state lawmakers are currently weighing a proposal, the FAIR Business Practices Act, to amend the state’s consumer protection statute to prohibit unfair and abusive practices. Passing this legislation should be an urgent priority.
Some may argue that New Yorkers don’t need these safeguards, but the CFPB has already received more than four times as many complaints from Syracuse this year compared to this time last year. Clearly action is needed.
We have spent our careers enforcing these tools across different agencies, most recently as leaders of the FTC and CFPB. Over the last four years, our agencies deployed these tools to crack down on pharmacy middlemen inflating insulin costs, to stop data brokers from surreptitiously tracking our movements, to make subscriptions easier to cancel, to return billions to victims of junk fees and to shut down predatory financial products. Had our agencies been limited to prosecuting only deceptive conduct, we would not have been able to deliver these wins for the public.
Unfortunately, New Yorkers can no longer count on vigorous federal enforcement. But the state is fortunate to have strong consumer protection leaders of its own. Syracuse state Sen. Rachel May serves as Chair of the Senate Consumer Protection Committee and has championed this legislation. And Attorney General Letitia James — one of the most effective attorneys general in America — has spoken out forcefully about the need to reform the state’s antiquated consumer protection statutes. We agree with May and James.
It is urgent that the legislature fix these gaps in New York law and help ensure that New Yorkers don’t pay the price for federal fecklessness.
City & State NY
Lina Khan asks NY to outlaw unfair business practices
The outgoing FTC chair wrote a letter to state leaders encouraging them to pass a new law banning “unfair and abusive” business practices.
January 23, 2025 | By Rebecca C. Lewis — In one of her last acts as the chair of the Federal Trade Commission, Lina Khan penned a letter to Gov. Kathy Hochul and legislative leaders urging them to outlaw “unfair and abusive” business practices in the wake of the Trump administration.
In a letter dated Jan. 19 – one day before President Donald Trump’s inauguration – Khan applauded recent actions by the state to increase consumer protections. But she warned about uncertainty in the field with the new administration, expressing the need for the state to pass a new law. “Given potential changes in how federal enforcers approach consumer protection in the coming years, equipping state enforcers with this additional authority is especially critical,” Khan wrote.
Hochul included a measure to ban unfair and abusive business practices in her budget last year, which would build on the state’s existing laws against deceptive practices. State lawmakers have also introduced the Consumer and Small Business Protection Act, which is slightly broader and permits class action lawsuits against businesses that engage in unfair, abusive or deceptive practices. The budget measure ultimately did not make it into the final version of last year’s state budget, and the Consumer and Small Business Protection Act has not passed yet.
The bill, which lawmakers reintroduced this year, would adopt the “unfairness authority” that the FTC has at the federal level, which Khan wrote in her letter is critical. “The flexibility that unfairness authority affords has been crucial to the Commission’s efforts to protect the American people in an ever-evolving economy over almost a century,” she wrote. Khan credited it in particular with FTC action to protect consumers from unscrupulous tech practices employed by businesses, such as Rite Aid’s use of artificial intelligence-based face recognition that often misidentified shoplifters.
In her letter, Khan also referenced an issue close to the governor’s heart: child online safety. Hochul has lauded landmark laws approved last year meant to protect children’s privacy online and restrict the use of algorithmic feeds when minors use social media. Khan wrote that the unfairness authority is “integral to protecting children and teens online,” citing a recent case where the FTC punished a company for promoting anonymous messaging apps to children.
This is at least the second such letter that the FTC has sent to Hochul and leaders. Last February, the then-heads of the commission’s Bureau of Consumer Protection and Office of Policy Planning wrote a similar letter as state leaders considered including consumer protections in last year’s budget.
Khan was one of President Joe Biden’s most controversial nominees; as FTC chair, she aggressively challenged proposed mergers and launched investigations into the business practices of large tech companies like Amazon and Microsoft. Her novel interpretation of antitrust law endeared her to progressives while infuriating pro-business conservatives. On Monday, Trump named a new FTC chair to replace Khan, and Khan subsequently announced that she planned to resign from the commission in the coming weeks.
City & State NY
Opinion: Delivering better consumer financial protection for New Yorkers
As President Donald Trump dismantles the U.S. Consumer Financial Protection Bureau, the former director of the CFPB says it’s up to states like New York to crack down on unfair business practices.
By Richard Cordray, first director of the U.S. Consumer Financial Protection Bureau from 2012–2017.
March 28, 2025
New York urgently needs new legislation to “muscle up” its laws that protect consumers. Following the 2008 financial crisis which led to the Great Recession, Congress created the U.S. Consumer Financial Protection Bureau and gave it broad powers to combat “unfair, deceptive, or abusive” conduct. In the years since, the CFPB has clawed back and returned billions of dollars to customers from financial institutions that cheated them.
These widespread harms to consumers can take various forms. The CFPB’s first enforcement actions returned hundreds of millions of dollars to consumers who opened new credit card accounts and were charged useless “add-on” fees in the process of signing up for them.
Another notorious action exposed Wells Fargo for signing people up to fake bank accounts they had not requested, which padded the numbers for awarding bonuses to employees. In yet another major action, the CFPB joined 49 state attorneys general in ordering Ocwen Financial to repay $2 billion to homeowners for rampant legal violations in servicing their home mortgages. In many other cases, as in Ocwen, the CFPB has teamed up with New York and other states to get meaningful relief for those hurt by illegal and predatory practices.
But the Trump administration is now backing away. Elon Musk wants to “delete” the CFPB, and his minions are working to gravely weaken it, including by dropping major law enforcement actions against financial companies for harming consumers. And who are the consumers now at risk? They are our families, our friends, ourselves – everyone who uses basic consumer financial products like mortgages, credit cards, auto loans and student loans.
The gutting of protections at the federal level sounds the alarm for state officials who care about consumers and who can do more to protect them. A key piece of legislation to modernize New York’s core consumer protection laws is thankfully being advanced by state Attorney General Letitia James. The bill is the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act, and it will be sponsored by state Sen. Leroy Comrie and Assembly Member Micah Lasher, both of whom are ardent supporters and sponsors of consumer protection legislation.
How will this bill matter? Let’s step back for a moment and look at the bigger picture. Our American system of federalism provides for dual levels of responsive governments – one national authority and many state governments designed to be closer to the people – to better ensure liberty and security to each citizen.
For over two centuries, this system has proved durable and yet flexible enough to meet localized needs in different regions of our country. Authority has ebbed and flowed, especially when it comes to economic matters. Sometimes the federal government has stepped in with new programs and initiatives. More often, state and local leaders have paved the way for new expansion and development – be it by digging the Erie Canal or building the subway system for New York City.
Often these parallel layers reinforce one another, as they do in constructing a workable network of roads and rail transportation or in financing and administering our vast system of higher education. Federalism also allows state leaders to move forward even when the federal government retreats, as the Trump administration is now rapidly doing on consumer protection.
In fact, for most of our history, state and local governments served as the front line of protection against fraudulent and deceptive practices by financial institutions. In recent years, the states have continued their vital work alongside and in conjunction with federal officials. But with Musk’s aggressive new chokehold on the CFPB, state law enforcement authorities, including the New York attorney general’s office, are already moving to pick up the slack.
New York, however, is working with a law passed generations ago that – unlike many other state laws and their federal counterparts – only prohibits “deceptive” practices, but does not reach either “unfair” or “abusive” practices. As long as the cops were on the beat at the national level, this narrower approach was less consequential. But now that the feds are standing down, New Yorkers are exposed.
The markets for consumer products have become increasingly complex. Bad actors are using powerful new technologies and computer algorithms to fleece consumers in ways both large and small. By adding extra fees or complicated contract terms, often buried deep in the fine print, they can harm consumers using methods that go beyond merely tricking or deceiving them. A stronger response is needed to protect New Yorkers more effectively.
One thing we can count on is that the lawbreakers are endlessly creative and imaginative. New York needs the more robust tools provided in the proposed legislation to keep pace with these novel schemes. The federal government has identified the needed tools but now has lost its will. New York officials have the will and the know-how to protect consumers, but they need these better tools to do the job properly. The time is now for a strong push to pass the FAIR Business Practices Act as soon as possible.
Times Union
Commentary: New York must do more to protect small businesses from predatory loans
The FAIR Business Practices Act would ban deceptive, unfair and abusive practices, including deceptive or opaque interest rates.
By Eda Henries, founder and managing principal of Henries & Co.
January 23, 2025 — Since the federal Truth in Lending Act doesn’t extend protections for small businesses seeking commercial loans, a handful of states, including New York, have stepped up to help small-business borrowers by requiring certain disclosures. The problem is that New York law does not go far enough.
New York does not prohibit loans containing unfair or abusive terms, and courts have excluded these lending businesses from the existing general prohibition against deceptive practices. These seemingly small omissions are a big problem for small businesses.
I operate a financial advisory firm, and although I work with highly successful small businesses, nearly every one of my clients has had some experience with predatory lenders. This happens because traditional banks have largely exited the small-business lending area, leading to a riskier capital landscape.
When a small-business owner needs a loan today, they often start with a Google search and immediately come across nontraditional lenders that can offer quick cash. But the flip side of that is these loans typically come with very high interest rates and confusing fees that leave a borrower worse off than before. What may look like growth funding or growth capital ends up being a debt trap.
Lenders that prey on small businesses skirt traditional regulations to trap entrepreneurs into a debt cycle. The predatory collections practice, paired with enormous payment requirements and unclear contracts, can result in a loan of less than $200,000 leading to payments of $1,000 per day.
Sometimes, the consequence of a predatory loan is not just the disruption or even closure of a small business. It can also mean personal bankruptcy because many small business owners are tricked or pressured into personally guaranteeing their business loans. Bankruptcy resulting from a predatory loan is not the American Dream.
The situation cries out for federal action: Congress should extend Truth in Lending Act protections to cover commercial loans. But with that action unlikely, and with the Trump administration deemphasizing financial regulation, as evidenced by its gutting of the Consumer Financial Protection Bureau, states like New York must step up and fill in the gaps.
That’s why I urge our state lawmakers to pass state Attorney General Letitia James’ FAIR Business Practices Act, which would ban deceptive, unfair and abusive practices that harm small businesses, including deceptive or opaque interest rates.
New York has taken some strides when it comes to protecting small businesses from predatory loans, but the work is not yet complete. If the state is truly committed to supporting small businesses, it cannot allow bad actors in the lending space to act without guardrails or in abusive, unfair ways. To help our small-business community, New York must protect it from deceptive, unfair and abusive practices by unscrupulous lenders, vendors and other predatory businesses.
CFPB Letter to New York State on the Prohibition on Abusive Conduct
By Brian Shearer
March 11, 2024
The Honorable Kathy Hochul
Governor of New York State
NYS State Capitol Building
Albany, NY 12224
Dear Governor Hochul:
The Consumer Financial Protection Bureau's (CFPB) Office of Policy Planning and Strategy is pleased to provide this submission regarding proposed legislation in the State of New York on bolstering consumer protection law.
The CFPB is an independent bureau within the Federal Reserve System and an executive agency charged by Congress with promoting fair, transparent, and competitive markets. The CFPB is also the lead federal agency charged with administering the prohibition on abusive conduct in connection with the provision of consumer financial products or services.
Prohibition on Abusive Conduct
We understand that New York is considering adding the prohibition on abusive conduct to New York’s existing laws prohibiting deceptive conduct. The creation of the federal prohibition on abusive conduct was a significant milestone in the history of consumer protection. In the wake of the financial crisis in 2010, Congress passed the CFPB’s authorizing statute, the Consumer Financial Protection Act (CFPA), which banned abusive conduct. The passage of this landmark legislation was in large part a response to the proliferation of set up to fail products, such as the subprime mortgages that were the basis of the 2007-2008 financial crisis. By adding the abusive prohibition, Congress recognized that the existing prohibitions on unfair and deceptive acts or practices were not adequate to prevent the economic meltdown. As it had done many times before, Congress amended the law to address new challenges.
While the addition of the abusive prohibition was a response to 21st century harms, it is firmly rooted in the American legal tradition of ensuring fair dealing. Last April, the CFPB published a Policy Statement on Abusive Acts or Practices in order to assist consumer financial protection enforcers in identifying wrongdoing. The statement explained that the abusive prohibition is part of a long history of Congress granting additional tools to government enforcers at both the federal and state level to address market failures, including through the passage of the Federal Trade Commission (FTC) Act in 1914 and the Wheeler-Lea Act in 1938.
Congress had the foresight to structure the CFPA to allow state regulators and attorneys general to bring actions to stop abusive conduct. See 12 U.S.C. § 5552(a). As Director Chopra has noted, the CFPB does not have a monopoly when it comes to policing abusive conduct. State actors are often at the front line of identifying abuses on the ground and can act swiftly to protect consumers. Today we see lawbreakers innovating new ways to take advantage of consumers – whether through digital dark patterns, novel schemes to set up consumers to fail, or exploiting captive consumers who have no choice but to deal with a particular business.
As you consider legislation in this area, we believe the “reasonable reliance” component of the abusive prohibition is critical. This component of the federal prohibition recognizes that people often reasonably expect that certain businesses will help them make difficult financial decisions, and there is potential for betrayal or exploitation of that trust.
The reasonable reliance language was part of a careful and deliberate multi-part prohibition crafted by Congress in response to widespread concerns about mortgage brokers who accepted payment for steering consumers into set up to fail mortgages during the financial crisis.
The CFPB has brought numerous actions based on the reasonable reliance component of the abusive prohibition to stop businesses from exploiting consumers’ trust in order to scam and defraud them. In 2014, the CFPB sued ITT Educational Services, the for-profit college chain, for positioning its financial advisors as subject matter experts on how to finance college but then pushing students into unaffordable loans. In 2016, the CFPB sued Access Funding, a structured settlement-factoring company, for taking advantage of cognitively impaired victims of lead-paint poisoning by steering them to an attorney who purported to act as an independent advisor but failed to do so. And more recently, in 2021, the CFPB took action against an online debt settlement company, SettleIt, for steering consumers into high-cost loans by affiliated lenders while keeping consumers in the dark about its relationships with its affiliate lenders. Language in SettleIt’s call scripts even included “we are not owned or operated by any of your creditors.”
These examples demonstrate the importance of the reasonable reliance component of the abusive ban and its real world impact for people.
Prohibition on Unfair Conduct
We also understand that New York is considering adding the prohibition on unfair acts or practices to help protect against bad business conduct. The prohibition on unfairness is a critical standard of fair dealing which was codified in federal law 100 years ago and has longer roots in common law. The FTC, CFPB, and states have used the prohibition on unfairness to combat everything from illegal junk fees to deficient data security practices.
Prohibition on Deceptive Conduct
Finally, we understand that New York is considering clarifying that an act or practice may be deceptive even when the representation is not directed at a consumer. This position is in alignment with the CFPA’s federal prohibition on deceptive conduct, which bars deceptive acts or practices without limitation – and hence including targeting other parties beyond a consumer – if the deception is in connection with the offering or provision of consumer financial products or services.
Honest business conduct should not rely on trickery or manipulation, and such conduct should be stopped regardless of whether or not the deception happens to be directed at the consumer.
Thank you for your consideration. We hope this information is valuable to you as you consider these legislative reforms. Please do not hesitate to reach out if there is any assistance we can provide.
Sincerely,
Brian Shearer
Assistant Director
Office of Policy Planning and Strategy