The New York attorney general is backing a bill that could make financial services the next target for mass litigation—here’s what banks, fintechs, and loan servicers need to know.
New York lawmakers—with full support from the attorney general—are pushing a sweeping expansion of consumer protection laws that could turn routine financial transactions into the next big class action battleground and expand the enforcement arsenal of the NY AGs office.
The Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act of 2025 (a proposed bill, not yet law) would:
- Ban not just deceptive but also “unfair” and “abusive” business practices (a CFPB-style UDAAP standard, now with private lawsuits)
- Create statutory damages of $1,000+ per violation, mandatory attorneys’ fees, and treble damages
- Permit class actions against banks, fintechs, loan servicers, and payment processors
- Allow small businesses and nonprofits to sue under UDAAP laws
- Expose vendors and service providers—including fintech platforms, loan servicers, and BNPL providers—to liability
The bill explicitly extends its reach beyond New York by applying to any business that conducts transactions with New York consumers, regardless of whether the company is physically located in the state. If passed, this bill will significantly increase UDAAP enforcement and litigation risk.
Broad Applicability—But Limited Affirmative Defense Are Available
The bill broadly allows private lawsuits from individual consumers, small businesses, and nonprofits. However, if the plaintiff does not meet certain eligibility criteria, the defendant may raise an affirmative defense.
A defendant may argue for dismissal if the plaintiff is:
- Not an individual consumer
- Not a small business (defined as having fewer than 300 employees and under $500 million in revenue or $250 million in assets)
- Not a nonprofit entity
This means that while small businesses and nonprofits can still sue under the UDAAP framework in the bill, large institutions attempting to use UDAAP claims in business disputes may be blocked. However, financial services firms, fintechs, loan servicers, and payment processors remain fully exposed to consumer and small business litigation, as well as suits brought by the attorney general.
Other affirmative defenses provided in the bill include the following: (a) if the alleged UDAAP violation is redressable under federal securities or intellectual property laws; or (b) if the claim arises from a high-value commercial transaction where the value exceeds $1 million, all parties have "extensive commercial experience with the subject matter of such transaction," and the practice was directed exclusively to the parties involved (this defense does not apply to practices related to residential housing). Additionally, the bill prevents businesses from using compliance with federal regulations as an automatic defense, meaning that while adherence to federal rules may still be considered, it does not provide complete immunity from liability under the proposed amended statute.
Litigation Timing: When Can Private Lawsuits Be Filed? Is There a Cure Period?
The bill requires a pre-litigation demand process before a private lawsuit can be filed:
- Before filing suit, a consumer must send a written demand letter giving the business 30 days to respond
- The business has 10 days to offer a cure or settlement before the consumer can move forward with litigation
- If a full refund or resolution is offered and rejected, the court may consider limiting damages, but this does not block lawsuits altogether
This may not act as a full “safe harbor.” While it provides an opportunity to resolve individual disputes, it may not serve to prevent class actions, treble damages, or attorney fee awards.
Service Providers Beware: New UDAAP Risks for Fintechs, Processors, and Vendors
Unlike the federal Consumer Financial Protection Act (CFPA), the bill does not explicitly impose aiding-and-abetting liability—but that may not stop plaintiffs from targeting fintech platforms, payment processors, and loan servicers.
If a lender, servicer, or debt collector is accused of UDAAP violations, plaintiffs will likely attempt to drag in service providers. There is no “safe harbor” for fintechs, software platforms, or embedded finance companies—meaning plaintiffs may attempt to extend liability beyond the primary business:
- Loan Servicers – Missteps in loan modifications, escrow accounts, or fee disclosures could trigger UDAP liability
- Payment Processors – Processing fees or BNPL repayment structures could be labeled "unfair" or "abusive"
- Subscription Billing Platforms – If automatic payments are not clearly disclosed, expect UDAAP lawsuits
Arbitration as a Defense Strategy
Unlike some consumer protection laws, this bill does not restrict arbitration clauses.
Businesses can still use arbitration agreements and class action waivers—a critical tool in reducing exposure.
Now is the time to strengthen arbitration clauses and class action defenses before litigation escalates.
State Attorneys General Already Have UDAAP Authority
While only a small number of state UDAAP-style statutes (aka “mini”-FTC Acts) have “abusive” authority, the state attorneys general—including the New York attorney general—already have authority to enforce the federal CFPA’s UDAAP provisions (12 U.S.C. § 5536), which prohibit unfair, deceptive, and abusive acts or practices in consumer financial transactions.
Under the Dodd-Frank Act, state attorneys general can bring civil actions to enforce federal UDAAP standards against financial institutions, fintechs, and service providers. However, the FAIR Business Practices Act would go even further, creating a state-level private right of action, broader enforcement powers, and statutory damages—allowing lawsuits that do not require the attorney general to be involved and potentially lowering the bar for plaintiffs to bring claims.
Get Ready for the Lawsuit Surge
If you’re in financial services—banks, lenders, fintechs, payment processors, servicers—you need to pay attention.
This bill has the full backing of the New York attorney general. If it passes, there could be a flood of litigation targeting fee structures, disclosures, loan terms, and servicing practices.
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