The skyline of Lower Manhattan’s Financial District as well as the entire island of Manhattan, New York City, shot wide angle via helicopter from an altitude of about 1500 feet over New York Harbor.
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New York has long set the pace for financial regulation, from policing Wall Street to shaping national consumer finance norms. Now, the state is turning its attention squarely to fintech. In a surge of legislative and executive action, New York is expanding its enforcement powers, imposing community lending obligations on nonbank lenders, cracking down on algorithmic bias and deceptive pricing, and becoming one of the first states to regulate frontier AI. For fintech executives and general counsels, these developments signal a pivotal shift. The message to fintechs is clear: adapt your strategies or risk running afoul of New York’s new rules. Below, I break down four key regulatory changes and their implications.
New Law Lets AG Target Unfair and Abusive Practices
New York’s Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act dramatically expands the state’s consumer protection law. Signed by Governor Kathy Hochul in late 2025, the FAIR Act amends General Business Law §349 to outlaw “unfair” and “abusive” business acts and practices, and not just deception. Until now, New York only prohibited deceptive practices, but starting February 2026 the Attorney General can pursue companies for conduct that causes substantial consumer harm or takes advantage of consumers’ lack of understanding even if no fraud is involved. Notably, while the New York Attorney General gains this broader enforcement power (similar to the CFPB’s authority under federal law), the law stops short of allowing private lawsuits for unfair or abusive acts.
For fintech firms, the compliance stakes have risen. The AG has signaled it will use the FAIR Act to tackle predatory lending practices, excessive fees, and other tactics that “take advantage of New Yorkers,” including consumers with limited English proficiency. Practices that were once legally gray may now invite enforcement if they “cause substantial injury” without countervailing benefits. Executives should proactively review products and terms for any elements that could be seen as unfairly harmful or overly exploitative, such as hidden fees or confusing fine print. In short, New York has embraced a UDAAP-style standard, and fintech companies must tighten their internal compliance programs accordingly to avoid becoming test cases under this expanded law.
Fintechs Face New CRA Style Rules
Another game-changer is New York’s move to apply Community Reinvestment Act (CRA)-style obligations to non-bank lenders. Traditionally, the federal CRA pushed banks to serve low- and moderate-income communities. Now New York is extending a similar mandate to licensed mortgage bankers (non-bank mortgage lenders) via new Department of Financial Services (DFS) regulations. As of January 2026, DFS adopted a rule (3 NYCRR Part 120) implementing a 2023 state law (Banking Law §28-bb) that requires evaluating how these lenders meet the credit needs of the communities where they do business. In practice, DFS will assess each covered mortgage lender’s record using a lending test and a service test, much like federal CRA exams. However, the framework is tailored to non-banks; for example, a lender’s “assessment area” will be defined by where it does substantial lending, since these entities lack deposit-taking branches. Only larger mortgage lenders (those with over 200 home loan originations in the previous year) are subject to these examinations.
For fintech lenders, this equates to a new strategic mandate: community impact is now a factor for business growth. DFS can consider a lender’s community lending performance when approving expansions, acquisitions, or other applications. A fintech mortgage provider with weak outreach or scant lending in underserved neighborhoods could face hurdles in getting state approvals. Conversely, strong community lending and investment programs could become a competitive advantage. Fintech executives should start treating equitable lending as a core obligation – setting targets for lending to lower-income areas, partnering with community groups, and documenting outreach efforts. Similar rules already exist in states like Massachusetts and Illinois, and New York’s adoption may inspire other jurisdictions.
New York City Targets Fintech Practices
At the city level, New York’s leadership is doubling down on consumer protection in ways that directly affect fintech and digital services. On his first day in office, New York City’s new mayor signed executive orders to crack down on junk fees and “subscription traps.” These orders mobilize the city’s Department of Consumer and Worker Protection (DCWP) to aggressively enforce fair dealing in pricing, billing, and automated consumer interactions.
- Junk Fees: Executive Order 09 establishes a “Junk Fee Task Force” to target hidden charges that surprise consumers at checkout. This interagency task force is directed to coordinate enforcement and even recommend new legislation against bait-and-switch fees in housing, travel, ticketing, and other sectors. Fintech companies offering consumer services in NYC should expect greater scrutiny of any add-on charges or opaque pricing. In effect, New York City is saying that the price you advertise should be the price the customer pays with no more surprise “service” or “convenience” fees tacked on late in the process.
- Subscriptions: Executive Order 10 takes aim at “subscription tricks and traps,” instructing the DCWP to prioritize action against misleading auto-renewal practices. Companies must ensure that customers aren’t being misled or trapped in recurring subscriptions. Examples flagged include burying the true cost or renewal terms, making cancellation difficult, or enrolling consumers in ongoing plans without clear consent. For fintech services (from credit monitoring apps to premium accounts), this means easy cancellation mechanisms and transparent disclosures are now a must in New York City. Regulators are empowered to use NYC’s broad consumer protection law to penalize violators on a per-incident basis, which can add up quickly.
- Algorithmic Bias: New York City is also on the forefront of tackling algorithmic bias and AI-driven discrimination. Even before the current administration, NYC enforced a first-in-nation law requiring bias audits of automated hiring tools to ensure AI doesn’t perpetuate bias in employment decisions. Now, the City Council has passed the GUARD Act, creating an Office of Algorithmic Data Accountability to oversee fairness and transparency in city agencies’ AI tools. While these efforts focus on public sector AI, the trend is clear: the city is attuned to algorithmic harms. We can expect increased scrutiny of AI and algorithms used in consumer finance, from credit underwriting models to fraud detection systems, to ensure they are not discriminatory. Fintech firms operating in NYC should preemptively evaluate their algorithms for disparate impacts and document measures to prevent bias. The city’s consumer protection leadership (now stacked with former federal regulators) has signaled that technology-driven unfairness, such as AI-based price gouging or discriminatory lending algorithms, will not fly under its watch.
AI Developers Face Safety Mandates
New York is also preparing for the future with pioneering AI regulation. The Responsible AI Safety and Education Act (RAISE Act), signed into law in December 2025, makes New York one of the first states (joining California) to comprehensively regulate “frontier” artificial intelligence models. In essence, this law targets developers of advanced AI systems, specifically, the kind of large-scale machine learning models that underpin generative AI and complex decision-making tools. Fintech companies working on cutting-edge AI, or leveraging third-party AI platforms, need to understand the compliance duties the RAISE Act introduces.
Under the RAISE Act, large AI developers must publish information about their safety protocols and notify New York State within 72 hours of discovering any qualifying AI safety incident. A new oversight office within the NYDFS will monitor compliance and evaluate these safety measures. Critically, the state Attorney General can take enforcement action if companies fail to meet the Act’s standards or if they falsify their required reports, with civil penalties up to $1 million for a first violation (and up to $3 million for repeat offenses). While the law does not provide a private right of action, the prospect of million-dollar fines and injunctive relief will certainly keep AI-focused fintech innovators on their toes.
Strategically, the RAISE Act signals that AI governance must be part of fintech strategy. Even though the law’s full implementation will roll out over time (the Governor negotiated amendments delaying certain provisions, fintech firms should begin aligning with its spirit. This means conducting internal AI risk assessments, documenting model safety checks, and being ready to demonstrate transparency around AI tools. New York’s law was enacted amid a broader debate over who should police AI (with federal authorities questioning state-by-state rules), but New York has clearly decided not to wait. Fintech executives should anticipate similar regulatory trends elsewhere and recognize that building responsible AI is an ethical preference and a legal obligation.
Fintech Strategy Must Align With New York’s Higher Bar
New York’s expanded regulatory landscape – from consumer protection and fair lending to local business practices and AI oversight – is reshaping how fintech companies must operate. In this more stringent environment, fintech leaders are wise to double down on compliance and ethical practices. That means scrutinizing products for fairness, investing in community relationships, ensuring transparency in fees and subscriptions, and managing AI risks proactively. New York is raising the bar for fintech, and those who integrate these regulatory shifts into their strategy will be best positioned to thrive amidst the change.