Edition 5 • April 29, 2026

The Week in Consumer Protection

New York's expanded GBL 349 hits its two-month mark, the 1099-C tax trap after settling a debt, the FTC CARS Rule after the Fifth Circuit ruling, AI customer-service bots quietly denying consumer disputes, and the wave of tenant-screening accuracy class actions.

NY AG IRS FTC CFPB Federal Courts

This newsletter is for informational purposes only and does not constitute legal advice.

Tax season just ended, the FAIR Business Practices Act has now been New York law for two months, and the courts have been busy with consumer protection rules — some upholding them, some not. This edition covers the practical fallout: how the new state law is being applied, why a settlement letter from last year may have triggered a tax bill this April, where car buyers actually stand after the CARS Rule was struck down, what the CFPB is saying about AI dispute denials, and the steady drumbeat of class action settlements over inaccurate tenant-screening reports.
NY AG • State Law

New York's FAIR Business Practices Act: Two Months In

The Fostering Affordability and Integrity through Reasonable Business Practices Act took effect on February 17, 2026, expanding New York General Business Law Section 349 from a prohibition on "deceptive" practices to one that also reaches "unfair" and "abusive" conduct. The new statutory language tracks the federal UDAAP standard that the CFPB enforces, but with state-court venue, treble damages up to $1,000, and an Attorney General who has signaled an intent to use the new authority broadly.

In the first two months, the New York Attorney General's office has filed or announced investigations covering subscription traps, debt-collection scripts that pressure consumers into payment plans they cannot afford, dealer add-ons sold without separate disclosure, and online platforms that hide cancellation buttons behind multiple screens. The "abusive" prong, which reaches conduct that takes unreasonable advantage of a consumer's inability to protect their interests, gives plaintiffs and the AG a tool that GBL Section 349's old "deceptive" standard did not.

Private plaintiffs continue to bring GBL Section 349 cases under the longer-standing "deceptive" prong, but pleadings filed since February now routinely invoke the unfair and abusive prongs as well, often alongside federal FCRA, FDCPA, TCPA, or EFTA claims. The result is meaningful: a single course of conduct that is both deceptive and abusive can carry damages and statutory penalties in addition to the federal remedies.

General Information

If a New York business pressured you, hid material terms, exploited a language barrier, made cancellation impossibly hard, or conditioned a transaction on something you could not reasonably refuse, the conduct may now reach the unfair or abusive prongs of the expanded GBL Section 349. The expansion did not replace existing federal rights; it stacks on top. Save records of the transaction, the disclosures, and any cancellation attempts.

NY Attorney General →
IRS • Debt Settlement

The 1099-C Trap: When Last Year's Settlement Becomes This Year's Tax Bill

April brought a wave of unpleasant surprises for consumers who settled or had a debt forgiven during 2025. A creditor that cancels $600 or more of consumer debt is generally required to file IRS Form 1099-C and to send the consumer a copy. The Internal Revenue Service treats most cancelled debt as ordinary income under 26 U.S.C. Section 61(a)(11), which means a $10,000 credit card debt settled for $3,000 may be reported as $7,000 in taxable income for the year of cancellation.

The often-overlooked counterweight is the insolvency exclusion at 26 U.S.C. Section 108(a)(1)(B). A taxpayer who was insolvent immediately before the cancellation — meaning the total liabilities exceeded the fair market value of total assets — can exclude cancelled debt income up to the amount of insolvency. The exclusion is claimed on IRS Form 982. Bankruptcy discharges (Section 108(a)(1)(A)), qualified principal residence indebtedness, and certain student loan forgiveness also have specific exclusions or extensions. Many consumers who settled debts after a period of financial distress qualify for the insolvency exclusion in full and owe nothing on the cancelled amount, but only if they file the form.

A separate, common problem: the 1099-C is issued for the wrong year, the wrong amount, or the wrong identifiable event under 26 C.F.R. Section 1.6050P-1. A 1099-C issued years after the actual settlement, or after the underlying debt was already discharged in bankruptcy, can trigger an unwarranted tax assessment and create credit-reporting confusion if the same item is then re-reported on a credit file as collectible. The FCRA's accuracy duties at 15 U.S.C. Sections 1681e(b) and 1681s-2 apply to that downstream reporting.

General Information

If you received a 1099-C this spring, do not assume the entire cancelled amount is taxable. The insolvency exclusion under Section 108 is widely available and is claimed on IRS Form 982. A 1099-C issued for a debt that was discharged in bankruptcy, paid in full, never owed, or already reported in a prior year should be challenged with the issuer, and any subsequent re-reporting on a credit file can be disputed under the FCRA. Speaking to a tax professional about Form 982 before the IRS deadlines is generally worth the time.

IRS Form 1099-C →
FTC • Federal Courts

The CARS Rule Was Vacated. Where Does That Leave Car Buyers?

The Federal Trade Commission's Combating Auto Retail Scams Rule, finalized in December 2023, was designed to require dealers to disclose offering prices clearly, prohibit "junk fees" for add-ons that provide no benefit, and ban specific bait-and-switch tactics that have long been documented in motor-vehicle sales. In January 2025, the United States Court of Appeals for the Fifth Circuit vacated the rule in NADA v. FTC on procedural grounds, holding that the FTC had failed to follow the notice procedures required by 15 U.S.C. Section 57a. The rule never took effect.

Vacatur did not erase the underlying problems. Section 5 of the FTC Act still prohibits unfair and deceptive practices on a case-by-case basis. State law continues to apply in full. In New York, that includes General Business Law Section 349 (now expanded to unfair and abusive conduct) and the Motor Vehicle Retail Instalment Sales Act, codified in New York Personal Property Law Article 9 at Sections 301 through 314, which governs the content and disclosures of consumer auto-finance contracts. Truth in Lending Act disclosures under 15 U.S.C. Sections 1601 and following continue to apply to retail-installment sales. State Attorneys General have filed dealer-fraud cases under their own consumer protection statutes throughout the year.

Common patterns that the CARS Rule would have addressed and that remain prevalent: nominal "documentation" or "compliance" fees that turn out to be hundreds of dollars, "VIN-etching" or "anti-theft" packages added to the financed amount without separate disclosure, advertised online prices that do not match the price quoted in person, and undisclosed add-ons revealed only at the moment of signing. Each remains potentially actionable under state law.

General Information

If a dealer added charges that did not appear on the advertised price, billed for products you did not affirmatively select, or refused to itemize fees, the absence of the federal CARS Rule does not foreclose action. Save the advertisement, the worksheet, the retail-installment contract, and any add-on disclosures. New York consumers have additional remedies under Personal Property Law Article 9, GBL Section 349, and the Lemon Law where defects emerge afterward.

FTC on the CARS Rule →
CFPB • AI

AI Customer-Service Bots Are Quietly Denying Consumer Disputes

The Consumer Financial Protection Bureau has been signaling for more than a year that the use of automated systems to handle billing-error disputes, FCRA reinvestigations, and Regulation E error claims does not change the legal duties owed to consumers. In a 2025 issue spotlight, the Bureau described complaints from consumers who submitted credit-report disputes only to receive an instantaneous "verified as accurate" response that bore no markers of any actual investigation, sometimes within seconds of submission. The use of an algorithm to triage or auto-reject disputes is not unlawful in itself, but it cannot substitute for the reasonable investigation duty under 15 U.S.C. Sections 1681i and 1681s-2(b).

The same pattern has appeared in bank disputes under the Electronic Fund Transfer Act and Regulation E (12 C.F.R. Section 1005.11). A bank that closes an unauthorized-transfer claim within hours, without contacting the consumer for any additional information, has likely failed to conduct the "reasonable investigation" the regulation requires. Credit card billing-error claims under the Fair Credit Billing Act at 15 U.S.C. Section 1666 carry analogous duties.

The practical signal of an AI-generated denial is its speed and its non-specificity: a response that does not address any of the specific facts the consumer raised, that arrives faster than a human investigator could realistically have reviewed the file, or that uses identical phrasing across multiple disputes. None of those features are dispositive, but together they support the inference that the statutory investigation duty was not actually performed. That inference, in turn, supports the willfulness element required for FCRA statutory and punitive damages under 15 U.S.C. Section 1681n.

General Information

If a bank, credit bureau, or card issuer denied your dispute almost instantly with a generic response that did not engage with the specific facts you raised, the denial may not have been the product of the investigation the law requires. Save the dispute as you sent it, the response as you received it, and the timestamps. Re-disputing with new information is often productive; in many cases, it also strengthens the record for a later willful-violation claim.

CFPB updates →
FCRA • Federal Courts

Tenant-Screening Accuracy Class Actions Continue to Pile Up

Tenant-screening reports — the consumer reports that landlords pull before approving a rental application — have produced one of the most consistent streams of FCRA litigation over the past five years, and 2025 and early 2026 have continued the trend. Class settlements involving major tenant-screening companies have addressed mismatched-identity reports (where a different person's eviction or criminal history was attributed to the consumer), reports that listed dismissed or sealed cases as if they were active, and reports that surfaced expired records well past the FCRA's seven-year look-back limit at 15 U.S.C. Section 1681c.

The legal framework is the same one that governs credit reports. Consumer reporting agencies must follow reasonable procedures to assure maximum possible accuracy under 15 U.S.C. Section 1681e(b), must conduct a reasonable reinvestigation under 15 U.S.C. Section 1681i when the consumer disputes an item, and may not report most negative information older than seven years. When a landlord takes adverse action based on a tenant-screening report, the FCRA's adverse-action rules under 15 U.S.C. Section 1681m apply: notice of the adverse action, contact information for the screening company, the right to a free copy of the report within sixty days, and the right to dispute it.

New York layered on additional protections through New York Real Property Law Section 227-f, which prohibits landlords from refusing to rent based on a prospective tenant's prior involvement in landlord-tenant proceedings, and through New York General Business Law Section 380-c, which requires specific adverse-action notices for consumer reports used in housing decisions. The Clean Slate Act, codified at New York Criminal Procedure Law Section 160.57, automatically seals certain criminal convictions after eligibility periods expire, and tenant-screening reports that surface those sealed records can violate both state law and the FCRA's accuracy duty.

General Information

If a rental application was denied based on a tenant-screening report that contained a record that was not yours, that was sealed or expunged, that was older than seven years, or that misclassified an outcome (a dismissed case as a conviction, for example), you likely have a path to dispute the report and a possible FCRA claim against the screening company. The landlord's adverse-action notice should give you the screening company's name, and the company is required to give you a free copy of the report within sixty days. Our companion article on tenant-screening denials goes through the steps in more detail.

CFPB on tenant screening →

Have questions about anything you read here? Wondering if something that happened to you is a violation of federal or New York law? We offer free consultations and there is no cost to you for most consumer protection cases.

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