State attorneys general (AGs) are increasingly shaping the enforcement landscape for consumer financial services in response to shifting federal priorities and a less active Consumer Financial Protection Bureau (CFPB). These officials, who operate as independently elected public officials in most states, have long had broad authority to commence investigations and enforcement actions. Now, amid regulatory rollbacks at the federal level, many AGs are flexing that authority, and in greater coordination with their peers and other federal and state prosecutors.
State AGs are using their expansive consumer protection powers to target a growing range of financial products and services, often relying on broad unfair and deceptive acts and practices (UDAP) statutes. These laws, combined with state AGs’ authority under federal statutes like the Dodd-Frank Act, allow for enforcement even when federal agencies remain on the sidelines.
This Insight, based on a recent webinar from our State Attorneys General series, explores how state AGs are asserting themselves in the consumer financial services space, what issues they are prioritizing, how their investigations unfold, where state financial regulators fit in, and what companies can do to stay ahead of enforcement risks.
Despite differences in party affiliation and state politics, state AGs frequently align on enforcement in the consumer financial services space, where they believe that the facts are compelling and the public interest is clear. Several areas of focus have recently emerged.
Elder Abuse and Social Engineering Fraud
State AGs are increasingly focused on elder abuse, which can go beyond nursing homes and involve consumer financial services and fraudulent payments, as well as social engineering fraud, in which scammers develop online relationships with victims and coax them into transferring funds. In one high-profile 2024 case, the New York AG sued a global bank for failing to reimburse victims of such fraud, citing federal electronic fund transfer protections.
Artificial Intelligence
State AGs are beginning to scrutinize how algorithmic decision-making powered by artificial intelligence (AI) may contribute to discriminatory outcomes in areas like lending. Since these AI models are only as good as the data used for the model, poor or incomplete data can reinforce systemic biases, which could raise fair lending and discrimination issues.
Recharacterization of Non-Credit Products as Loans
State AGs are also challenging how novel products or services fit into existing consumer protection rules. For example, Earned Wage Access (EWA) products, which allow employees to access wages they have already earned but have not received through a scheduled paycheck, are facing scrutiny from enforcers who argue that the associated fees may effectively constitute interest. In April 2025, the New York AG brought a case against two fintech providers offering such services under the state’s usury laws, contending that EWA offerings are “loans” despite intentional efforts to structure the products non-credit.
New York is also leading the way on scrutiny of Buy Now, Pay Later (BNPL) products, recently enacting legislation that treats BNPL arrangements as loans, aligning them with federal Truth in Lending Act standards. This move comes as the CFPB withdrew a 2024 interpretive rule on BNPL in May 2025 after stating it would not enforce the interpretive rule.
This state-level scrutiny is not confined to EWA and BNPL. In February 2025, the Massachusetts AG brought a similar theory to bear on home equity investment products, arguing they should be treated as mortgage loans. Rent-to-own providers are also facing similar challenges, with the New York AG suing one such company in 2024, claiming its lease agreements were actually disguised loans that violated state usury caps.
Such recharacterization cases can have severe consequences and trigger retroactive liability, forced product changes, licensing obligations, and class action exposure. The increasing frequency of such actions sends a clear message: state AGs are not afraid to reinterpret existing law to capture emerging financial products.
Auto Lenders, Debt Settlement, and Debanking
In more traditional spaces, state AGs are continuing to target auto lenders and debt settlement companies. The Illinois AG and the Federal Trade Commission (FTC) reached a $20 million settlement with a major auto dealer in December 2024 for alleged deceptive practices in car sales, financing, and product add-ons. Debt relief providers, meanwhile, continue to draw enforcement actions, with the Minnesota AG shutting down several firms in late 2024.
Finally, “debanking,” or the denial of financial services based on a customer’s industry or beliefs, is gaining traction as a nonpartisan concern. Several states have passed laws addressing it, and AGs across the political spectrum have signaled interest in investigating discriminatory debanking practices.
State AG investigations often begin quietly. A single consumer complaint, online review, or tip from a financial regulator may prompt informal fact-finding, even before a civil investigative demand (CID) is issued. Once a CID is served, negotiations typically follow regarding the scope of production. These discussions can be lengthy, but resolution is often preferable to litigation.
If the AG proceeds with an enforcement action, litigation in a state court may follow. Removal to federal court is rare, as state AGs are not considered “citizens” of their state for diversity jurisdiction purposes. However, cases that rely on federal statutes such as the Fair Credit Reporting Act, Credit Repair Organizations Act, Dodd-Frank, or Electronic Fund Transfer Act may create a federal hook.
Even when litigation ends, enforcement is rarely over. Most resolutions include a compliance period involving follow-up reporting, audits, or third-party monitoring.
Most states have financial regulators separate from their AGs. These include the New York Department of Financial Services, California’s Department of Financial Protection and Innovation, and Florida’s Office of Financial Regulation. Their mandates and powers vary, with some overseeing banking institutions directly.
While AGs and financial regulators often operate independently, they frequently collaborate. State financial regulators conduct routine examinations and gather troves of company data. That information, in turn, can be shared with AGs and used to initiate enforcement actions. When the two entities work in tandem, the impact on a target company can be considerable.
The trend line is clear: AGs are ramping up. Offices are expanding, especially in New York and California, and adding attorneys with federal experience. This increase in staffing suggests more frequent investigations and a higher volume of enforcement actions.
At the same time, state AGs are coordinating more closely with one another and with agencies like the FTC. These partnerships allow for simultaneous investigations, joint complaint filings, and harmonized enforcement theories. State AGs from California, New York, Pennsylvania, Illinois, Massachusetts, Colorado, Texas, and Connecticut frequently lead these efforts, but participation is broad and bipartisan.
In light of the enforcement trends discussed above, companies operating in the consumer financial space would do well to consider the following strategies to reduce exposure to state AG enforcement:
As the future of federal consumer financial services enforcement remains uncertain, state AGs are increasingly acting as the frontline regulators in this sector. Their willingness to reinterpret product categories, coordinate across jurisdictions, and pursue enforcement under both state and federal law makes them formidable actors in this space. Financial services providers, from established institutions to fintech startups, need to understand how AGs operate, what drives their priorities, and how to avoid an enforcement action.
Visit our state attorneys general practice page and register for upcoming webinars in our comprehensive State Attorneys General Program Series, which provides timely insights and practical guidance on actions taken by AGs and other political subdivisions in response to changes in federal regulations and enforcement.
Read our other Insights in this series.