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These efforts develop on an interim last guideline issued in 2025 that rescinded certain COVID-era loss-mitigation securities. N/AConsumer finance operators with fully grown compliance systems deal with the least danger; fintechs Capstone expects that, as federal guidance and enforcement wanes and consistent with an emerging 2025 trend of renewed leadership of states like New York and California, more Democratic-led states will improve their consumer protection initiatives.

In the days before Trump started his second term, then-director Rohit Chopra and the CFPB launched a report entitled "Strengthening State-Level Customer Protections." It intended to offer state regulators with the tools to "update" and enhance consumer security at the state level, directly contacting states to revitalize "statutes to address the difficulties of the modern-day economy." It was fiercely criticized by Republicans and industry groups.

Since Vought took the reins as acting director of the CFPB, the agency has actually dropped more than 20 enforcement actions it had previously initiated. The CFPB submitted a claim versus Capital One Financial Corp.

The CFPB dropped that case in February 2025, quickly after Vought was called acting director.

On November 6, 2025, a federal judge rejected the settlement, finding that it would not offer adequate relief to customers damaged by Capital One's service practices. Another example is the December 2024 suit brought by the CFPB against Early Warning Solutions, Bank of America Corp. (BAC), Wells Fargo & Co.

(JPM) for their alleged failure to protect consumers from fraud on the Zelle peer-to-peer network. In Might 2025, the CFPB revealed it had actually dropped the lawsuit. James chose it up in August 2025. These 2 examples recommend that, far from being without consumer defense oversight, market operators remain exposed to supervisory and enforcement risks, albeit on a more fragmented basis.

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While states may not have the resources or capability to attain redress at the very same scale as the CFPB, we anticipate this trend to continue into 2026 and continue throughout Trump's term. In response to the pullback at the federal level, states such as California and New york city have proactively reviewed and revised their consumer security statutes.

In 2025, California and New York reviewed their unreasonable, misleading, and abusive acts or practices (UDAAP) statutes, offering the Department of Financial Defense and Development (DFPI) and the Department of Financial Solutions (DFS), respectively, extra tools to manage state customer financial items. On October 6, 2025, California passed SB 825, which allows the DFPI to impose its state UDAAP laws versus various lenders and other consumer finance companies that had traditionally been exempt from coverage.

The structure requires BNPL providers to get a license from the state and approval to oversight from DFS. While BNPL products have actually traditionally benefited from a carve-out in TILA that excuses "pay-in-four" credit products from Annual Percentage Rate (APR), charge, and other disclosure rules appropriate to specific credit products, the New York structure does not maintain that relief, presenting compliance concerns and enhanced threat for BNPL providers operating in the state.

States are also active in the EWA space, with numerous legislatures having established or considering formal structures to control EWA products that permit workers to access their incomes before payday. In our view, the viability of EWA products will differ by design (i.e., employer-integrated and direct-to-consumer, or DTC) and by underlying regulatory requirements, which we anticipate to vary throughout states based on political composition and other characteristics.

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Nevada and Missouri enacted EWA laws in 2023, while Wisconsin, South Carolina, and Kansas passed legislation in 2024. In 2025, states such as Connecticut and Utah established opposing regulatory structures for the product, with Connecticut declaring EWA as credit and subjecting the offering to cost caps while Utah clearly identifies EWA items from loans.

This lack of standardization throughout states, which we expect to continue in 2026 as more states embrace EWA guidelines, will continue to force companies to be mindful of state-specific guidelines as they expand offerings in a growing item category. Other states have similarly been active in strengthening consumer protection rules.

The Massachusetts laws require sellers to plainly divulge the "overall price" of a service or product before gathering consumer payment information, be transparent about necessary charges and charges, and carry out clear, simple systems for consumers to cancel subscriptions. In 2025, California Guv Gavin Newsom (D) signed into law California's own version of the Federal Trade Commission's Combating Automobile Retail Scams (CARS) guideline.

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While not a direct CFPB initiative, the automobile retail industry is an area where the bureau has flexed its enforcement muscle. This is another example of increased customer security initiatives by states amidst the CFPB's remarkable pullback.

The week ending January 4, 2026, offered a controlled start to the brand-new year as dealmakers returned from the holiday break, however the relative quiet belies a market bracing for a pivotal twelve months. Following a rough close to 2025punctuated by the Federal Reserve's December rate cut and the shockwaves from the First Brands fraud scandalmiddle market individuals are entering a year that industry observers increasingly characterize as one of differentiation.

The agreement view centers on a maturing wall of 2021-vintage debt approaching refinancing windows, increased analysis on private credit evaluations following prominent BDC liquidity occasions, and a banking sector still browsing Basel III application delays. For asset-based loan providers specifically, the First Brands collapse has triggered what one market veteran explained as a "trust but validate" required that promises to reshape due diligence practices throughout the sector.

Nevertheless, the course forward for 2026 appears far less direct than the alleviating cycle seen in late 2025. Present overnight SOFR rates of roughly 3.87% show the Fed's still-restrictive stance. Goldman Sachs Research expects a "skip" in January before prospective cuts resume in March and June, targeting a terminal rate of 3.0%3.25% by year-end.

Including unpredictability to the monetary policy outlook,. The incoming presidents from Cleveland, Philadelphia, Dallas, and Minneapolis generally carry a more hawkish orientation than their outgoing counterparts. For middle market borrowers, this translates to SOFR-based financing costs stabilizing near current levels through a minimum of the first quartersignificantly lower than 2024 peaks but still raised relative to pre-pandemic norms.