State lawmakers gear up for enforcement

A week before the presidential inauguration, the Consumer Financial Protection Bureau preemptively handed off its enforcement baton, and a handful of state lawmakers hit the ground running. Expecting President Donald Trump to sideline the CFPB — which he did on Feb. 3 — the agency released a report offering state regulators seven recommendations for stepping up enforcement activity in the financial services sector. The report, entitled Strengthening State-Level Consumer Protections, urged lawmakers to remain committed to the policies created by the CFPB in recent years. Specifically, the CFPB called for state regulators to incorporate the prohibition of “abusive” — not just “unfair” or “deceptive” — practices into consumer protection laws if they haven’t already. Including the concept of “abusive” practices sidesteps the need to demonstrate consumer injury to establish liability, thereby enabling regulators to police tactics like gaps in understanding or unequal bargaining power, the CFPB wrote. [caption id="attachment_57336258" align="aligncenter" width="1024"] (Courtesy/Bloomberg)[/caption] New York State Gov. Kathy Hochul stepped up with a plan to prevent companies from discriminating against individuals in product pricing. “Gov. Hochul will propose first-in-the-nation legislation to require businesses to clearly notify consumers when the price they see was set by an algorithm using their consumer data to personalize the price,” according to New York’s 2025 State of the State report, released in mid-January. The practice of generating individualized pricing by feeding browsing behavior and purchase history into machine-learning algorithms — dubbed “surveillance pricing” by the FTC — “could strip consumers of their ability to comparison shop or plan for the price of goods and services, and is potentially discriminatory,” according to the report. Junk fees In addition to guidance on abusive and discriminatory practices, the CFPB report discussed clearly defined bans on “junk,” or hidden, fees . Specifically, the CFPB called out add-on or ancillary services “that a company can overprice because the customer is captive.” Fundamentally, a junk fee is a way of increasing the price of a good without increasing the sticker price, thereby confusing consumers trying to compare products or services from multiple providers. In auto finance, junk fees could include administrative costs, document-preparation fees, dealer markups or other miscellaneous charges. Unlike interest rates, which are openly negotiated, junk fees often appear in the fine print of loan agreements, catching borrowers by surprise. On Jan. 23, HB 25-1090 was introduced in the Colorado House to protect consumers from deceptive pricing. The bill calls for companies to disclose “the maximum total (total price) of all amounts that a person may pay” for a good, service, or property excluding a government or shipping charge. Similarly, on Jan. 1, Minnesota adopted a ban on junk fees for anything other than mandatory gratuities or credit card processing fees. While some companies are bracing for lost revenue, others warn that the regulation could spur price increases, counter to the law’s original intent. Stronger enforcement Aside from pricing topics, the CFPB report calls for stronger tools for investigation and enforcement, elimination of requirements to prove monetary injuries and tougher consumer data and privacy rights. In New Jersey, a data privacy law went into effect Jan. 15. The New Jersey Data Privacy Act, as the regulation is called, demands that companies collect only the minimum personal data necessary for stated purposes and mandates explicit consent for processing sensitive data like financial information. Noncompliance can result in significant penalties. In years past, the CFPB has worked hand-in-hand with state attorneys generals to investigate and prosecute auto financiers. In January 2023, the CFPB and N.Y. AG Letitia James sued Credit Acceptance Corp. for alleged predatory lending . The lawsuit claimed that CAC misstated terms such as principal and interest amounts on loan agreements and provided incentives to dealers to offer expensive, add-on products such as guaranteed asset protection (GAP) and vehicle service contracts. Illinois, meanwhile, appears to be in the early stages of creating a CFPB-like agency to police consumer protection . “The financial safety of Illinois residents should not be left to the whims of federal politics, which is why we are taking steps towards the creation of a potential Illinois CFPB,” said Illinois Sen. Mark Walker . “This is an opportunity to reaffirm the state’s leadership in protecting our people from fraud and abuse, as the federal administration abandons its responsibilities.” Woodstock Institute , a policy and research nonprofit that advocates for consumer financial protection, intends to join Sen. Walker’s effort by participating in a coalition to “review the bill, propose any changes we feel need to be made in order to protect marginalized individuals and communities, and advocate for its passage if it meets our standards of strong and equitable consumer financial protection,” said Horacio Méndez , Woodstock’s president and chief executive. Needless to say, state regulators are just gearing up their enforcement efforts. Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Early-bird registration is available here .

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