The landscape of consumer financial services is shifting, driven by a broader deregulatory trend at the federal level. In this environment, companies must still address federal consumer financial law compliance and navigate a patchwork of state laws that often exceed or differ from federal standards. Below is a primer on key areas of state consumer financial regulation, now more important than ever for businesses seeking to stay compliant and competitive.
1. State Licensing Laws for Financial Services Providers
Most states require licensing for nonbank financial services providers—lenders, loan servicers, mortgage brokers, money transmitters, debt collectors, debt relief services, and sales finance companies. State regulators, such as banking departments or financial services agencies, oversee these licenses and set compliance obligations that can include background checks, minimum net worth standards, compliance programs, and periodic reporting. These statutes often include intricate change of control requirements, which may trigger licensing obligations, regulatory notifications, or even new applications when ownership structures shift. These requirements vary widely by state and statute, adding complexity to mergers, acquisitions, and other corporate transactions. Many states coordinate licensing via the Nationwide Multistate Licensing System (NMLS), although the specific requirements vary considerably by jurisdiction.
2. State Lending Laws and Interest Rate Caps
Consumer lending has always been heavily regulated at the state level, including installment loans, payday loans, and small-dollar lending. States impose usury limits—capping interest rates and fees—along with rules on loan terms, underwriting standards, and repayment schedules. In some cases, states have successfully opted out of federal standards (e.g., the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA)), applying their own caps to loans facilitated by bank-fintech partnerships and other nonbank lenders. A handful of states, such as California and New York, are known for stricter ceilings, while others, like Utah or South Dakota, take a more permissive approach. Certain jurisdictions even ban high-cost payday lending outright.
3. State UDAP Laws (“Mini-FTC Acts”)
Every state has its own Unfair and Deceptive Acts and Practices (UDAP) law, often called a “mini-FTC Act.” These statutes prohibit unfair or deceptive practices—much like federal consumer protection laws once enforced by the CFPB and the Federal Trade Commission, although they vary by jurisdiction. But the difference now is that state attorneys general and private litigants may take the lead, frequently relying on these UDAP statutes to combat alleged misleading marketing, hidden fees, or predatory terms. Many states allow private rights of action under these laws, enabling class actions without any federal regulator involvement.
4. State Enforcement Under the Consumer Financial Protection Act: Empowered by CFPB Guidance
The federal Consumer Financial Protection Act (CFPA) gives state attorneys general and regulators the authority to enforce federal consumer protection laws, including the prohibition on unfair, deceptive, or abusive acts and practices (UDAAPs). Throughout his tenure, then CFPB Director Rohit Chopra reinforced this power by outlining how states can pursue actions independently of the CFPB. A 2022 interpretive rule emphasized that states don't need the Bureau’s blessing to act and can seek such remedies as restitution, damages, and civil penalties. In 2025 CFPB staff also released a report on how states can ensure their laws and regulations meet new consumer protection challenges, as well as a compendium of guidance documents that the Chopra-era CFPB issued to address emerging challenges in the market for consumer financial products or services. This guidance effectively encourages states to step up consumer protection efforts, particularly when federal enforcement priorities shift.
5. Federal Consumer Financial Laws with State Enforcement Authority
The CFPA isn’t the only tool states can use to protect consumers. Many federal consumer financial laws explicitly empower state enforcement, including the Fair Credit Reporting Act (FCRA), Truth in Lending Act (TILA), Fair Debt Collection Practices Act (FDCPA), and Electronic Fund Transfer Act (EFTA). These laws allow state attorneys general to bring civil actions, often with the same remedies as those available to federal agencies. There are also often state laws that mirror specific federal consumer financial law statutes.
For example, the FCRA permits states to sue credit reporting agencies and furnishers for noncompliance, while the FDCPA allows states to tackle abusive debt collection practices. In many cases, state regulators can even recover civil penalties and seek injunctive relief. This broad enforcement authority empowers states to act when they identify alleged harmful practices.
6. State Debt Collection Laws
While the Fair Debt Collection Practices Act (FDCPA) remains on the federal books, many states have tough debt collection rules. For instance, New York and California restrict call frequency, Massachusetts institutes cooling-off periods, several states require licensure for collectors, and other activities may fall under servicing or lending statutes. Importantly, state UDAP laws often apply to first-party creditors, filling a gap the FDCPA doesn’t cover and raising the risk for original lenders and servicers. State licensing laws may also apply to certain first-party activities and the collection of commercial loans.
7. State Money Transmission and Payments Laws
Money transmitters—handling e-payments, cryptocurrency, or peer-to-peer transfers—are regulated primarily at the state level. Most require licenses, minimum capital reserves, and adherence to consumer protection standards, if applicable. California’s Department of Financial Protection and Innovation (DFPI) and New York’s Department of Financial Services (NYDFS) are known for rigorous oversight in this domain. Even providers offering digital wallets, stored-value cards, or buy-now-pay-later might trigger money transmitter obligations—and how these laws apply to crypto is rapidly evolving.
8. Mortgage and Servicing Regulations
Mortgage brokers, lenders, and servicers must meet state-specific mortgage laws, on top of any remaining federal statutes (like TILA or RESPA). Many states, such as New York and Illinois, exceed these federal benchmarks—demanding rigorous licensing, disclosure, and loss mitigation protocols. Forbearance rules, foreclosure timelines, and borrower communication mandates can also vary widely by state.
9. State Credit Reporting and Data Privacy Laws
Although the Fair Credit Reporting Act (FCRA) sets a federal baseline, states like California and Vermont impose additional restrictions on credit reporting, including how long negative info can appear. In some states, data privacy laws also layer on further compliance burdens—governing data collection, consumer notice, and opt-out rights.
10. State Wage Garnishment and Judgment Collection Laws
Wage garnishment and asset levies vary by state. Unlike the federal 25% garnishment limit, some states (e.g., California) have tighter protections, while states like Texas largely prohibit wage garnishment for consumer debts.
11. State Attorney General Enforcement and Multistate Investigations
Even before the CFPB’s shutdown, state attorneys general (AGs) held significant enforcement power under their own Unfair and Deceptive Acts and Practices (UDAP) laws. Now, they may well be the primary enforcers of consumer protection in nonbank finance. AGs often collaborate across state lines, launching multistate investigations against companies suspected of large-scale violations.
Crucially, even states perceived as “business-friendly” can become active if faced with a flood of consumer complaints or obvious scams. Most AG offices have complaint hotlines, and consumer harm remains the universal trigger for deeper investigations—no matter the state’s political leaning.
12. State Laws and Advertising Consumer Financial Services
State laws governing consumer financial services often extend their reach to the advertising and marketing of consumer financial products and services, sometimes triggering licensing obligations. These laws typically prohibit deceptive, misleading, or unfair marketing practices, mirroring federal standards under the Consumer Financial Protection Act, but with state-specific nuances. For example, some states require specific disclosures in advertisements, such as clear presentation of interest rates, fees, and terms, while others impose affirmative obligations to substantiate claims made in marketing materials. In certain states, engaging in advertising without the appropriate license—particularly for consumer credit/lending, including mortgage, debt relief, or credit services—can lead to enforcement actions, even if the company is not actively transacting business. Additionally, states like California and New York have aggressive enforcement arms that scrutinize digital marketing practices, including social media advertising and lead generation. As the CFPB's role shifts, state regulators may intensify their focus on marketing practices, making it critical for companies to ensure compliance not only with federal standards, but also with the evolving patchwork of state advertising and licensing requirements.
13. The Role of State Consumer Protection Agencies
Beyond state AGs, many states have independent consumer protection agencies or banking departments that oversee licensing, examinations, and enforcement actions. In the absence of a strong federal presence, these agencies can—and often do—directly set and enforce the rules for companies operating in their states.
Final Thoughts: Embracing a State-Centric Compliance Strategy
Instead of viewing state rules as a second-tier concern, companies must now see them as the primary legal battleground. Even a single overlooked state requirement can trigger litigation or multistate investigations—there is no longer a federal safety net or central set of expectations that simplifies your compliance load.
A proactive, state-focused compliance approach helps companies thrive without the specter of federal intervention—yet it also demands robust planning and nimble adaptation. By understanding how state consumer finance laws operate and staying attentive to local enforcement trends, you can grow confidently in a world where the CFPB appears to no longer be the most aggressive consumer financial services regulator.
