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.
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.