[co-author: Sharon Bustamante]
On March 13, New York State introduced proposed legislation titled the Fostering Affordability and Integrity Through Reasonable Business Practices Act (FAIR Act). The proposed legislation seeks to broaden the scope of consumer protection from deceptive business practices currently available under existing law by amending § 349 of the General Business Law (GBL). If enacted, the FAIR Act would provide individuals, small businesses, and non-profit organizations with greater legal recourse at the state level and target a wider range of alleged harmful conduct, including “unfair” and “abusive” business practices.
Protection Beyond Deceptive Acts
GBL § 349 currently safeguards consumers against business acts or practices that are deemed “deceptive,” which mislead or are likely to mislead a reasonable consumer. The FAIR Act seeks to bring “unfair” and “abusive” acts by businesses, banks and other financial services companies — e.g., auto lenders, mortgage and student loan servicers — within its purview. These broad definitions could encompass practices such as difficult-to-cancel subscriptions, hidden fees, and predatory debt collections, and other acts seeking to steer borrowers and consumers into higher cost loans. Furthermore, the expanded definitions may lead to increased litigation as plaintiffs get creative with what they allege falls into “unfair” and “abusive” conduct.
Defining “Consumer Oriented” Conduct
Another key provision of the FAIR Act expands the reach of § 349 beyond merely “consumer-oriented conduct.” Under the existing legal landscape, courts have developed a narrow consumer-oriented doctrine that limits actionable conduct to those impacting the public at large or part of a broader or recurring pattern. The FAIR Act would make conduct unlawful regardless of whether it is “consumer oriented,” affects the public at large, or is part of a recurring pattern, thus covering a substantially wider array of alleged harmful transactions. Notably, the FAIR Act explicitly states that protections extend not just to individual consumers, but also small businesses and non-profits.
Enhanced Civil Penalties and Standing
The proposed legislation also seeks to significantly enhance statutory damages, increasing them from $50 to $1,000, in addition to the recovery of any personal damages. Further, if a defendant’s actions are found to be willful and knowing, damages may be tripled. Moreover, the allocation of attorney’s fees is no longer left to the discretion of the court, but rather mandated for any prevailing plaintiff, potentially making it more worthwhile for consumers to bring challenges.
In actions brought by the Attorney General, defendants now face increased civil penalties of $5,000 per violation. Willful or knowing offences are subject to harsher penalties starting at $15,000 for each violation and can increase to three times the restitution value, depending on which amount is greater.
One of the primary goals of the FAIR Act is to impose supplemental penalties for actions targeting members of vulnerable groups, including minors, the elderly, servicemembers, veterans, those with physical or mental impairments, and those with limited English proficiency. These penalties range anywhere between $5,000 to $10,000 for each vulnerable person injured.
Standing under the FAIR Act is also expanded, allowing organizations and third parties to bring claims on behalf of others to the fullest extent otherwise permitted by law.
Addition of Affirmative Defenses
While the FAIR Act allows for a broader range of claims, it also adds a number of affirmative defenses. Defendants can challenge claims by arguing that a plaintiff is neither an individual nor a small entity. This is in line with the overall goal to prioritize not only individual consumers, but also small businesses and non-profits,
Additionally, preemption would be added as an affirmative defense. If the challenged conduct can be addressed under existing federal securities or intellectual property laws, defendants may be able to dismiss claims.
Implications
Recently, the Consumer Financial Protection Bureau dialed back its regulatory and enforcement activity through an announcement of its 2025 supervisory and enforcement priorities and a withdrawal of 67 regulatory guidance documents (discussed here and here). As the federal landscape shifts, New York’s proposed law attempts to step up consumer financial protection enforcement in its place.
The FAIR Act is one of the most comprehensive attempts to modernize New York’s consumer protection laws. With its far-reaching scope, the enactment of this legislation would drastically reshape the legal landscape for consumer-facing business in the state.
Companies doing business in New York now may face increased legal challenges due to the inclusion of “abusive” and “unfair” acts in § 349. To mitigate the potential risks, it would be prudent to implement enhanced consumer protection measures and focus resources into compliance systems to adhere to the expanded legal framework.
The consumer financial services industry might experience heightened regulatory scrutiny by the New York Department of Financial Services, prompting increased audits and investigations. Businesses should remain vigilant regarding the developments of the FAIR Act and be ready to adapt their practices accordingly. With the likelihood of increased enforcement at the state level, it is crucial for companies to stay informed and prepared for potential changes.
Troutman Pepper Locke will continue to monitor and report on the FAIR Act as it progresses through the New York State legislature.
