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As part of her 2025 State of the State address, New York Governor Kathy Hochul has announced plans to target issues such as scams and the rise in unregulated buy now, pay later (BNPL) use.
The proposals aim to crack down on scams, regulate emerging financial products and strengthen consumer rights in the US state of New York, with the Democrat governor suggesting various rules to enhance oversight of firms in the banking and payments sector.
“New Yorkers are tired of being nickel-and-dimed by hidden fees, overly burdensome policies, confusing fine print and unfair practices,” Governor Hochul said in a press release.
“Online shopping is more popular than ever, and we need to update our laws to reflect the changing times. That’s why I’m proposing nation-leading consumer protections that prioritise consumer rights and keep hard-earned money in New Yorkers’ pockets.”
The plans include taking on the issue of “elder fraud”.
In her proposals, Hochul said that she is prioritising the protection of vulnerable seniors, with new legislation that will empower financial institutions to pause suspicious transactions and mandate reporting of suspected exploitation to law enforcement and Adult Protective Services.
In addition, the state will roll out training for institutions to spot exploitation while maintaining the autonomy of affected individuals.
Regulating BNPL
Governor Hochul also said that the rapid growth of the BNPL industry has raised concerns about consumer overextension and data misuse.
To address this, the governor proposes a licensing and supervision framework for BNPL providers.
The legislation would introduce safeguards, including clear disclosure requirements, limits on late fees, robust dispute resolution processes and data privacy protections.
The need for safeguards is supported by recent Consumer Financial Protection Bureau (CFPB) findings that highlighted that nearly two-thirds of BNPL loans were granted to consumers with subprime or deep subprime credit scores, with lenders approving 78 percent of these applications.
Further proposals
The governor also plans to build on legislation signed in 2023 directing the Department of Financial Services to issue regulations capping daily overdraft fees, banning predatory practices and ensuring timely notifications to improve transparency.
Other proposals target online shopping, with a plan to mandate businesses to simplify cancellation procedures, ensuring they are as straightforward as signing up, building on earlier laws requiring notifications of upcoming renewals, and another proposal mandates a minimum 30-day return window for most products sold by medium and large retailers, with some exceptions such as final-sale items.
Hochul also said that she will seek to introduce first-in-the-nation legislation regarding surveillance pricing.
This proposal would require businesses to notify consumers when personal data influences pricing and prohibit the use of protected class data, such as age or gender, in setting prices.
“We work hard to protect consumers from being taken advantage of before, during and after a purchase in-store or online,” said New York Secretary of State Walter T. Mosley.
“We applaud Governor Hochul’s proposal to strengthen the laws that will hold unscrupulous actors accountable and stand up for New York’s consumers in the marketplace.”
Expect new rules
Banks and payments companies face increased operational demands and compliance costs if Hochul’s plans are implemented.
The expectation to implement systems and processes to identify, pause and report suspicious transactions involving elderly or vulnerable individuals will require upgrades to fraud detection tools, staff training and more reporting.
In addition, new regulations capping daily overdraft fees and banning exploitative charges will likely reduce revenue streams, prompting payment service providers to revise their business models.
BNPL providers with a customer base in New York face a new licensing and supervision framework, potentially creating barriers to entry for smaller firms.
Like their banking counterparts, they will also have to deal with more compliance costs.
Firms will need to strengthen their data privacy practices, limit late fees and provide transparent disclosures, and this increased oversight will also mean stricter enforcement actions.
These changes no doubt create challenges for firms as they deal with a new, increased consumer protection focus.
However, for BNPL in particular, this could allow for increased mainstream acceptance, and enable better competition with incumbent credit card companies.
