More AI Confusion via State/Federal Regulatory Conflict
A proposed FTC policy statement issued July 1 “in accordance with President Donald Trump’s December executive order, argues that AI companies may violate Section 5 of the FTC Act if they quietly steer model outputs toward objectives other than those users reasonably expect, even when doing so to satisfy state regulatory requirements. A Sheppard Mullin analysis says the proposal places AI developers in an increasingly difficult position as a growing number of states adopt AI laws that may conflict with the federal government’s consumer protection approach.”
Why It Matters:
The proposal is seen as an attempt to promote a national AI policy and discourage a patchwork of state regulations. “With states continuing to introduce and enact AI legislation governing model outputs and algorithmic decision-making, companies operating nationwide may find themselves navigating inconsistent legal obligations. A developer that modifies outputs to reduce exposure under state anti-discrimination laws could face a federal deception claim, while a developer that declines to make those changes could face state enforcement or private litigation.”
Oregon Formalizes Guidance Requiring Nonbank BNPL Providers and Service Providers to Obtain State Lending Licenses
Although some states have expressly addressed the licensing and regulation of Buy Now Pay Later (BNPL) service providers through legislation and/or regulation, other states have informally advised providers to register/obtain licenses under existing laws/regs applicable to nonbank lending activities. The Oregon Department of Consumer and Business Services, Division of Financial Regulation (DFR), is now formalizing the requirement for BPNL providers to obtain Oregon lending licenses.
Why It Matters:
“The Bulletin is noteworthy because it rejects several arguments that BNPL providers have advanced in other jurisdictions regarding the applicability of state lending laws.”
Former CFPB Director Chopra Appointed to Head California’s New Business and Consumer Services Agency (BCSA)
Why It Matters:
“Former CFPB officials are dispersing into public-interest law firms, nonprofit advocacy organizations, state attorneys general offices, state financial regulators, academia, and even cabinet-level state government positions. Working independently, and often in collaboration, they appear poised to pursue many of the same consumer protection objectives that previously were advanced primarily through the CFPB.
“Whether this evolving network ultimately proves as influential as the CFPB remains to be seen. Nevertheless, one conclusion already seems warranted: the Bureau’s reduced enforcement presence should not be mistaken for a comparable reduction in enforcement risk.”
