On June 18, 2025, the New York Legislature passed the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act (the “FAIR Act”). This significant legislation marks the most substantial update to New York's consumer protection laws in over four decades, dramatically expanding protections against unfair, deceptive, or abusive practices. Given its expansive nature, this Act has profound implications for businesses operating in the consumer finance lending and debt settlement industries.
Overview of the FAIR Act
The FAIR Act significantly broadens the scope of General Business Law § 349 (GBL § 349). Historically, this statute primarily targeted deceptive practices affecting consumers. Under the FAIR Act, however, businesses in the consumer finance and debt settlement sectors must now navigate newly defined prohibitions on unfair and abusive practices. These new prohibitions reflect standards similar to those enforced by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).
Unfair practices under the Act align closely with the FTC standard, encompassing acts that cause substantial injury to consumers, which are not reasonably avoidable, and are not outweighed by any benefits to consumers or competition. Meanwhile, abusive practices align with the CFPB's criteria, prohibiting actions that materially interfere with a consumer’s understanding or exploit consumer vulnerabilities such as limited understanding of complex financial products, reliance on misleading statements, or limited English proficiency.
Expanded Enforcement and Remedies
A notable change under the FAIR Act is the expanded enforcement authority granted to the New York Attorney General (NYAG). Previously confined to addressing consumer-oriented misconduct, the NYAG can now address unfair and abusive practices affecting small businesses and nonprofits. This expansion significantly broadens potential enforcement actions against entities in the consumer finance lending and debt settlement sectors.
The Act substantially increases potential penalties and remedies. Statutory damages rise dramatically from $50 to $1,000 dollars per violation, creating greater financial exposure for businesses. Civil penalties are set at up to five thousand dollars per violation, increasing to fifteen thousand dollars for knowing or intentional violations. Additionally, the Act explicitly allows both the NYAG and private litigants to recover attorney fees and costs, further amplifying litigation risks.
Practical Implications for the Consumer Finance and Debt Settlement Industry
Companies in the consumer finance lending and debt settlement sectors operating in or targeting New York markets must undertake comprehensive reassessments of their compliance frameworks. The broadened scope of the FAIR Act introduces considerable legal and operational challenges, significantly increasing exposure to potential litigation and regulatory enforcement actions.
The Act’s broad definitions of unfair and abusive practices could encourage litigation, notably class action lawsuits, and impose substantial costs, particularly on mid-sized entities in the consumer finance and debt settlement space. Businesses must therefore proactively review all customer-facing materials, disclosures, marketing strategies, and communication practices to ensure clarity, transparency, and compliance.
Immediate internal audits are recommended to identify and rectify any business practices potentially classified as unfair or abusive under the Act’s expanded standards. Companies should also prioritize employee training and education, particularly for personnel involved in sales, marketing, loan origination, debt negotiation, and customer support. Enhanced monitoring and robust compliance systems are necessary to detect and swiftly address potential violations. Industry participants should anticipate extensive regulatory oversight and potential enforcement activity upon the Act's enactment.
Governor Hochul is expected to sign the FAIR Act into law by mid-July 2025, with the Act becoming effective sixty days following the Governor's signature.
