Alston & Bird Consumer Finance Blog

#New York

UDAAP Update: New York’s FAIR Act Signed Into Law

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What Happened?

On December 19, 2025, New York Governor Kathy Hochul signed into law Senate Bill 8416, the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act, (the “FAIR Act”), which updates Section 349 of New York’s General Business Law (GBL). In our prior post we explained that following the law’s passage by the legislature, the FAIR Act expands the state’s consumer protection statute beyond just deceptive practices to also prohibit “unfair” and “abusive” business acts or practices, marking a major broadening of the New York Attorney General’s enforcement powers. Notably, the final law clarifies that only the Attorney General (“NYAG”) can bring claims for unfair or abusive practices, while private lawsuits remain limited to deceptive acts. The FAIR Act will take effect 60 days after signing, on February 17, 2026.

Why Does It Matter?

The FAIR Act represents a sweeping update to New York’s consumer protection law. Previously, New York law only prohibited deceptive acts and practices. The FAIR Act amends Section 349 of the GBL to also prohibit “unfair” and “abusive” acts or practices in the conduct of any business, trade, or commerce. In practical terms, this aligns New York with the consumer protection laws of almost every other state (47 of which already outlaw unfair practices) and with federal UDAAP standards. Key elements of the new law include:

Expanded Definitions

The statute now defines an “unfair” act as one that “causes or is likely to cause substantial injury” to consumers which is not reasonably avoidable and not outweighed by countervailing benefits. This definition is modeled on the Federal Trade Commission’s standard (15 U.S.C. § 45(n)). An “abusive” act is defined in line with the federal Consumer Financial Protection Act standard (12 U.S.C. § 5531(d)), i.e., something that materially interferes with a person’s understanding of a product or takes unreasonable advantage of someone’s lack of understanding or inability to protect their interests. These broad definitions mean practices that might not be outright deceptive could still be illegal if they unjustifiably harm consumers or exploit imbalances in knowledge or power.

Attorney General Enforcement & Private Rights

Importantly, the law limits enforcement of the new “unfair” and “abusive” provisions to the NYAG. Private plaintiffs can continue to sue under Section 349 only for “deceptive” acts, just as before – there is no new private right of action for unfair or abusive practices. This was a critical concession to avoid opening floodgates of litigation. However, the AG can now bring enforcement actions against businesses for unfair or abusive conduct, seeking injunctions, restitution, and civil penalties. We can expect the NYAG (which has been actively advocating for this law) to launch investigations and actions under the expanded provisions once the law is effective.

“Consumer-Oriented” Standard Preserved (for Now)

A contentious aspect of the FAIR Act was whether it would eliminate the judicially-created requirement that Section 349 cases be “consumer-oriented” (i.e. directed at the public at large, not private contract disputes). The version initially passed by the legislature removed the consumer-oriented limitation entirely, which would have meant the AG (and possibly private plaintiffs) could pursue claims even for one-off transactions or business-to-business dealings. However, in approving the law, Governor Hochul noted an agreement with legislators to ensure the act “does not override” existing case law on the consumer-oriented standard. In effect, this signals that commercial transactions and purely private disputes will not suddenly all become actionable under Section 349. The statute text still says an act can be unlawful “regardless of whether or not it is consumer-oriented” in an AG enforcement, but this may be revisited by a chapter amendment. For now, compliance should assume that private lawsuits still require a consumer-facing element (as before), while the NYAG might test the boundaries of targeting misconduct affecting small businesses or other non-consumer victims in the public interest.

What Do You Need to Do?

For banks, lenders, and other financial services companies operating in New York, the FAIR Act demands a thorough compliance review beyond the traditional focus on deception/fraud. Even though private litigation risk remains mostly unchanged (as it remains limited to deception claims), the NYAG can now act as a mini-CFPB, bringing the full range of UDAAP claims at the state level. Financial services companies must proactively ensure their products and practices meet these standards and should stay aware of any further regulatory guidance issued by the NYAG.

New York’s FAIR Act: What Financial Services Compliance Teams Must Know

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What Happened?

As we highlighted in March following its introduction, the New York’s Fostering Affordability and Integrity through Reasonable Business Practices (“FAIR”) Act represents a fundamental transformation of the state’s consumer protection framework, expanding enforcement authority beyond “deceptive” practices to include “unfair” and “abusive” acts. The FAIR Act has passed the legislature and awaits the governor’s signature.  The Fair Act will take effect 60 days following its enactment.

Legislative Changes

The FAIR Act transforms the New York’s consumer protection framework by expanding General Business Law (“GBL”) Section 349 beyond “deceptive” practices to include “unfair” and “abusive” acts. The amendments include several critical changes:

Expanded Scope of Prohibited Conduct

The GBL will now include and define three categories of unlawful business practices:

  • Deceptive practices: Under the existing standard, deceptive practices include acts that involve misleading or false representations.
  • Unfair practices: Under the FAIR Act, unfair practices include acts or practices that cause or are likely to cause substantial injury to consumers, which is not reasonably avoidable and not outweighed by countervailing benefits to consumers or competition.
  • Abusive practices: Under the FAIR Act, abusive practices include acts or practices that materially interfere with a person’s understanding of terms or conditions or take unreasonable advantage of a person’s lack of understanding, inability to protect their interests, or reasonable reliance by a person on a person engaging in the act or practice to act in the relying person’s interests.

Broader Protected Classes

The FAIR Act extends protections under Section 349 of the GBL to “businesses and non-profits as well as individuals,” recognizing that “small business or non-profit” entities need protection equivalent to consumers.

Elimination of Court-Imposed Limitations

The FAIR Act makes any prohibited act or practice under Section 349 of the GLB “actionable by the attorney general regardless of whether or not that act or practice is consumer-oriented,” overturning decades of judicial precedent that limited enforcement to consumer-facing conduct.

Enhanced Enforcement Authority

The Attorney General also gains expanded powers to bring actions against any person conducting business in New York, with broader jurisdiction and streamlined enforcement procedures. The Attorney General has the power to enjoin and seek restitution from any person conducting any business, trade or commerce or furnishing a service in New York, “whether or not the person is without the state.”

Why Does it Matter?

Federal Enforcement Vacuum

The legislation emerges as federal consumer protection enforcement has recently taken a sharp turn towards less regulation and enforcement, with states working to fill the gap left by the federal pullback. As the CFPB undergoes significant transition, certain state financial regulators and attorneys general appear poised to step into the CFPB’s shoes. New York’s legislation represents the most comprehensive state-level response to this federal retreat, potentially serving as a model for other jurisdictions. It is also worth noting that in March 2024, the CFPB, under then-Director Rohit Chopra, issued a letter to New York Governor Hochul supporting amendments to New York’s consumer protection laws to address unfairness and abusiveness.

Business Impact and Compliance Challenges

The legislation creates significant new compliance obligations for businesses operating in New York:

  • The “unfair” and “abusive” standards adopt federal concepts but apply them more broadly, creating uncertainty about compliance boundaries.
  • The law creates liability for the first time for “unfair” and “abusive” acts and practices while abrogating case law limiting the scope of the statute to allegedly consumer-oriented deception.
  • Removal of the “consumer-oriented” limitation means B2B transactions, internal business practices, and commercial relationships now face potential enforcement actions.

What Do I Need to Do?

In reviewing customer-facing and business-to-business practices against the new “unfair” and “abusive” standards, industry participants should bear in mind that the broad definitions require analysis beyond traditional deceptive practice frameworks.

First, despite federal changes, consumer protection compliance remains crucial, particularly as state enforcement intensifies. Companies should:

  • Ensure compliance policies address the broader unfair and abusive practice definitions;
  • Train personnel on the expanded standards;
  • Enhance monitoring systems for the broader range of prohibited conduct; and
  • Review and ensure documentation protocols for business practice justifications. The “unfair” standard includes a balancing test considering “countervailing benefits to consumers or to competition.” Companies should document legitimate business justifications for practices that might otherwise appear harmful.

Second, New York Attorney General Letitia James has been actively leading multistate coalitions on consumer protection issues, suggesting coordinated enforcement strategies. With CFPB enforcement curtailed, New York’s expanded authority makes the state a primary regulatory battleground. Financial institutions should expect heightened scrutiny of:

  • Fee structures and disclosure practices;
  • Lending practices and underwriting standards;
  • Customer communications and marketing materials; and
  • Digital platform interfaces and user experience design.

Third, the legislation’s focus on addressing “new and emerging technologies” suggests that companies should pay particular attention to:

  • Digital platforms and user interface design;
  • Data collection and usage practices;
  • Algorithmic decision-making processes; and
  • Subscription and recurring billing practices.

The FAIR Act represents a significant shift in the consumer protection landscape, with New York positioning itself as the primary regulatory authority as federal enforcement retreats. Businesses should assess their practices against these expanded standards while preparing for a more aggressive state enforcement environment. Other states are considering similar legislation, suggesting this may represent a broader trend requiring multi-state strategic planning. For example, California has introduced legislation to broaden its already robust and aggressive California Consumer Financial Protection Law to expand the authority of the Department of Financial Protection and Innovation to enforce consumer financial protection laws.

Companies operating in New York or considering New York operations must develop comprehensive compliance strategies that address not only the immediate requirements of the FAIR Act but also the evolving landscape of state-level consumer protection enforcement.

The elimination of traditional limitations on enforcement scope, combined with the broad definitions of unfair and abusive acts or practices, creates both compliance challenges and strategic opportunities for businesses that proactively adapt to this new regulatory environment.

Alston & Bird’s Consumer Financial Services Team is actively engaged and monitoring these developments and can assist with any compliance concerns regarding these changes to New York law.

New York Legislation Impacts Investments in Single-Family Rental Properties

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What Happened?

At both federal and state levels, there has been notable increased governmental scrutiny of institutional investment in the single-family rental market and concern about its impact on rising housing costs in the country.  For example, in October 2021 the United States Senate Committee on Banking, Housing and Urban Affairs held a hearing to discuss the impact institutional landlords have had on the housing market and tenants generally. Then, on July 11, 2023, the Stop Predatory Investing Act was introduced in the U.S. Senate, which aims to address the housing shortage by prohibiting investors who acquire 50 or more new single-family rental homes after the date of enactment from deducting interest or depreciation on those properties. Another version of this legislation was reintroduced in the Senate on March 11, 2025, and the revised bill would, among other things, also deny interest and depreciation deductions for taxpayers owning 50 or more single family properties.

New York State has now entered the fray. On May 9, 2025, Governor Hochul signed into law Assembly Bill A3009C that, notably, (i) imposes a 90-day waiting period on the purchase of one- and two-family residences for certain institutional investors, (ii) restricts the use of certain tax deductions for such investors, and (iii) requires the New York Secretary of State to provide public notice when creating cease and desist zones.

Why It Matters

The New York law is clearly aimed at institutional investors, known as “Covered Entities”, defined as those entities or combined groups that directly or indirectly (i) own ten or more single- or two-family residences, (ii) manage or receive funds pooled from investors and act as fiduciaries with respect to those investors, and (iii) have at least $30 million in net value or assets under management on any day during a given taxable year , and specifically impacts the purchase of single- and two-family residences in New York State.  Under the 90-day waiting period, Covered Entities may not “purchase, acquire, or offer to purchase or acquire” any interest in a single- or two-family residence unless that property has been “listed for sale to the general public” for 90 days. Further, when a Covered Entity offers to purchase a single- or two-family residence, it must provide notice of its status as a Covered Entity to the seller or the seller’s agent. The legislation contains three salient “subparts”.

Subpart A imposes a 90-day wait period before a “Covered Entity,” may make an offer to purchase or acquire a single-family or two-family residence, starting from the day the residence is listed for sale to the public. The 90-day period restarts if the seller changes the asking price. Finally, when making an offer to a seller, the covered entity must provide the seller with a signed statement declaring itself as a covered entity. Exact required language for this form is provided in the statute. A copy of this form must also be filed with the New York Department of Law within 3 days of the offer. However, Section 521 in Subpart A specifically lists July 1, 2025, as a starting date that Covered Entities must wait 90 days before offering to purchase single or two-family homes.

Subpart B adjusts what depreciation and interest may be deducted from the covered entity’s net income.

Subpart C requires the New York Secretary of State to post notice of an established cease and desist zone once annually in a locally circulated newspaper, on the Secretary’s website, and though any other method deemed necessary to maximize awareness of the cease-and-desist zone. Any homeowner in the zone who wishes not to be solicited may file a notice with the New York Secretary of State.

Failure to comply with these requirements could result in civil damages and penalties of up to $250,000 for violations of the waiting period and up to $10,000 for violations of the notice requirement for establishing cease and desist zones where real estate brokers and salespersons are excessively soliciting homeowners. Notably, however, failure to comply with the new law would not appear to expose holders of loans secured by properties not adhering to these new procedures to liability or impact the validity of the loans themselves.

This act takes effect on the one hundred twentieth day after it become law, but again the legislation designates July 1, 2025, as a starting date that Covered Entities must wait 90 days before offering to purchase single or two-family homes.

What to do now:

Other states are considering legislation that is similar to New York Assembly Bill A3009C, and the enactment of these laws along with the federal Stop Predatory Investing Act would significantly impact investments in single- family rental markets, not to mention the securitization of loans secured by these properties—with unintended consequences to these markets and the availability of single-family rental properties.

Large AI Model Developers in Focus for New York

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What Happened?

On June 12, 2025, the New York State legislature passed the Responsible AI Safety and Education (RAISE) Act, which awaits Governor Kathy Hochul’s signature or veto.  The RAISE Act addresses developers of “frontier” AI models—those large AI models that cost over $100 million or use massive compute—and it aims to reduce the risks of “critical harm,” or the death or serious injury to 100 or more people, or causing $1 billion or more in damages.  The law applies only to large-scale frontier AI models, and it excludes smaller AI models and start up initiatives.

Why is it Important?

If the RAISE Act is signed by the Governor, it would mean that:

  • Developers of fronter AI models must create robust safety and security plans before making those models available in New York; publish redacted versions of those plans; retain unredacted copies; and permit annual external reviews and audits.
  • Any “safety incident”—from model failure to unauthorized access—must be reported to New York’s Attorney General and the New York Division of Homeland Security within 72 hours.
  • The New York AG can penalize violations: up to $10 million for a first offense and $30 million for repeat infractions.
  • Employees and contractors are protected when reporting serious safety concerns.

What to do Now?

Pursuant to the New York Senate rules, the RAISE Act must be delivered to the Governor by July 27, 2025; once delivered, Governor Hochul will have 30 days to sign or veto the bill.  If it is signed, it will take effect 90 days later.

If it is enacted, in-scope AI firms and developers will need to ensure appropriate internal protocols, engage with third-party auditors, and maintain incident reporting and whistleblower channels.

New York State Proposes Consumer Protection Reforms through FAIR Business Practices Act

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What Happened?

On March 13, New York state legislators introduced new legislation called the Fostering Affordability and Integrity Through Reasonable (FAIR) Business Practices Act.  The bill, supported by New York Attorney General Letitia James, aims to strengthen New York’s existing consumer protection law and would expand the law’s scope from only covering “deceptive” acts or practices to also include “unfair” and “abusive” practices.  It would apply in the consumer, as well as the small business context.

Why Is It Important?

The FAIR Act comes at a time when consumer protection at the federal level has stalled, particularly with respect to the activities of the Consumer Financial Protection Bureau (CFPB).   State attorneys general have promised to step in to address any resulting gaps in consumer protection.

The FAIR Act defines unfair and abusive acts and practices expansively, to reach conduct that could be considered unfair or abusive, but arguably not deceptive.  Additionally, it provides for enhanced civil penalties for unfair, deceptive, or abusive practices against “vulnerable persons,” including those under 18 or over 65, active duty servicemembers and veterans, physically or mentally impaired persons, and individuals with limited English proficiency.  The legislation provides for civil penalties of: (a)$5,000 per violation; or (b) for knowing or willful violations, the greater of $15,000 or three times the amount of restitution for each violation.

What To Do Now?

Businesses operating in New York can prepare for potential changes by reviewing current practices to identify those that might be considered unfair or abusive under the broader scope of the FAIR Act.  Additionally, they can:

  • Monitor the progress of this legislation and be prepared to adjust business practices accordingly, especially as state-level enforcement of consumer protection laws is likely to increase in response to reduced federal action​​​​​​​​​​​​​​​; and
  • Pay particular attention to practices that might affect “vulnerable persons” as defined in the legislation, as these could result in enhanced civil penalties.