New York State Department of Financial Services to curb overdraft fee practices as New York advances buy now pay later licensing proposals

The New York State Department of Financial Services published an update on Governor Kathy Hochul’s 2025 State of the State consumer protection proposals, including a planned Department-led rulemaking to target overdraft and non-sufficient funds fee practices and proposed legislation to bring “Buy Now, Pay Later” providers under a licensing and supervision framework. The planned Department of Financial Services regulations would prohibit “predatory” fees, cap the number of daily overdraft charges, and require more timely notifications and improved transparency. The proposed “Buy Now, Pay Later” framework would introduce disclosures, dispute resolution standards, late fee limits, and data privacy protections. The package also includes proposals to combat elder financial exploitation by expanding the ability of banks and other institutions to pause certain suspicious transactions and requiring reporting of suspected exploitation and fraud to law enforcement and Adult Protective Services, alongside support for developing training for financial institutions. Several elements would require new legislation, including oversight of “Buy Now, Pay Later” loans and measures aimed at algorithmic price discrimination, subscription cancellation and renewal practices, standardized return windows, and Energy Service Company obligations to return unclaimed funds.