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These efforts build on an interim last guideline provided in 2025 that rescinded certain COVID-era loss-mitigation securities. N/AConsumer financing operators with mature compliance systems face the least danger; fintechs Capstone anticipates that, as federal supervision and enforcement wanes and consistent with an emerging 2025 trend of restored leadership of states like New York and California, more Democratic-led states will boost their consumer protection initiatives.

It was fiercely criticized by Republicans and market groups.

Because Vought took the reins as acting director of the CFPB, the firm has actually dropped more than 20 enforcement actions it had previously started. The CFPB filed a suit versus Capital One Financial Corp.

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

Another example is the December 2024 fit brought by the CFPB against Early Caution Solutions, Bank of America Corp. (BAC), Wells Fargo & Co.

(JPM) for their alleged failure supposed protect consumers secure customers on the Zelle peer-to-peer network. In Might 2025, the CFPB revealed it had dropped the lawsuit.

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While states may not have the resources or capability to accomplish redress at the very same scale as the CFPB, we expect this pattern to continue into 2026 and persist during Trump's term. In reaction to the pullback at the federal level, states such as California and New york city have actually proactively revisited and revised their customer defense statutes.

In 2025, California and New York revisited their unreasonable, deceptive, and abusive acts or practices (UDAAP) statutes, offering the Department of Financial Security and Development (DFPI) and the Department of Financial Solutions (DFS), respectively, additional tools to regulate state consumer financial products. On October 6, 2025, California passed SB 825, which permits the DFPI to impose its state UDAAP laws versus different lenders and other customer financing firms that had historically been exempt from protection.

The structure requires BNPL service providers to obtain a license from the state and authorization to oversight from DFS. While BNPL items have historically benefited from a carve-out in TILA that exempts "pay-in-four" credit items from Annual Portion Rate (APR), fee, and other disclosure rules relevant to specific credit items, the New York framework does not protect that relief, presenting compliance problems and enhanced threat for BNPL suppliers running in the state.

States are likewise active in the EWA space, with many legislatures having established or thinking about official structures to manage EWA items that enable employees to access their incomes before payday. In our view, the viability of EWA items will differ by design (i.e., employer-integrated and direct-to-consumer, or DTC) and by underlying regulatory requirements, which we expect to differ across states based upon political composition and other characteristics.

APFSC

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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 regulative structures for the item, with Connecticut declaring EWA as credit and subjecting the offering to charge caps while Utah clearly differentiates EWA products from loans.

This lack of standardization across states, which we anticipate to continue in 2026 as more states adopt EWA policies, will continue to force companies to be conscious of state-specific guidelines as they expand offerings in a growing item classification. Other states have similarly been active in reinforcing customer security guidelines.

The Massachusetts laws require sellers to clearly disclose the "total cost" of a product or service before collecting customer payment details, be transparent about mandatory charges and costs, and carry out clear, simple systems for customers to cancel memberships. 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 AND TRUCKS) rule.

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While not a direct CFPB effort, the auto retail market is a location where the bureau has bent its enforcement muscle. This is another example of increased customer protection initiatives by states in the middle of the CFPB's dramatic pullback.

The week ending January 4, 2026, used a controlled start to the brand-new year as dealmakers returned from the vacation break, however the relative quiet belies a market bracing for an essential twelve months. Following a turbulent close to 2025punctuated by the Federal Reserve's December rate cut and the shockwaves from the First Brands scams scandalmiddle market individuals are going into a year that industry observers progressively characterize as one of differentiation.

The consensus view centers on a growing wall of 2021-vintage debt approaching refinancing windows, increased analysis on private credit valuations following high-profile BDC liquidity occasions, and a banking sector still browsing Basel III implementation hold-ups. For asset-based loan providers particularly, the First Brands collapse has activated what one market veteran described as a "trust however confirm" mandate that assures to reshape due diligence practices across the sector.

The path forward for 2026 appears far less direct than the easing cycle seen in late 2025. Current overnight SOFR rates of around 3.87% show the Fed's still-restrictive stance. Goldman Sachs Research expects a "avoid" in January before potential cuts resume in March and June, targeting a terminal rate of 3.0%3.25% by year-end.

Adding unpredictability to the monetary policy outlook,. The incoming presidents from Cleveland, Philadelphia, Dallas, and Minneapolis typically carry a more hawkish orientation than their outbound counterparts. For middle market borrowers, this equates to SOFR-based funding costs supporting near present levels through at least the very first quartersignificantly lower than 2024 peaks but still raised relative to pre-pandemic norms.