What to Expect in Licensing in 2025
With the currently revolving door of directors at the federal Consumer Financial Protection Bureau (CFPB)—which may soon be on its fourth director in 2025 alone—and an order issued by Acting CFPB Director Russell Vought to “stand down” on all supervision and enforcement activities in place, many consumer financial providers and market participants are shifting their attention to state regulators as potential sources for increased regulation and enforcement activity in the coming year.
While the potential shift in enforcement activity from the federal government to the states has garnered a significant amount of attention, enacting new licensing laws or expanding existing laws to capture additional activities, market participants, and/or products is also an attractive solution for states that might desire to “fill the void” left by a less aggressive CFPB.
In addition to allowing states to exercise oversight and supervision of licensed financial service providers, state licensing laws often authorize state regulators to conduct periodic examinations or audits of licensees and can require licensees to collect data and submit reports. These reports can, in turn, further inform supervision or enforcement priorities. The state licensing laws also may provide state regulators with a favorable forum to initiate enforcement actions through a state administrative law or adjudicatory process as opposed to litigating in state or federal court.
As a result, we would not be surprised to see significant licensing developments in 2025.
Below, we discuss several emerging products, asset classes, and market participants that state legislatures and regulators have sought to sweep under their regulatory umbrellas and where we expect states to continue to be active in the coming year.
True Lender/Bank Partnership Loan Programs
One popular way that state legislatures apply their usury and licensing laws—and regulatory oversight—to consumer lending partnerships is by enacting so-called “true lender” laws. These are laws that, under certain circumstances, characterize a nonbank platform performing substantive loan origination activity on behalf of a federally insured bank as the lender of loans generated through the partnership as a matter of state law.
Ten states have enacted some form of a “true lender” law. Although the scope of these “true lender” laws differs across these states, several of these laws (including those that have been enacted in Connecticut, Illinois, Maine, Minnesota, New Mexico, and Washington) characterize a person as the “lender” of a loan as a matter of law if the person holds the predominant economic interest in a loan originated through a bank partnership or otherwise is the lender under a “totality of the circumstances” analysis. “True lender” legislation was introduced, but not enacted into law, in the District of Columbia, Florida, and Maryland during 2024. We expect these and other states to continue to advance and enact “true lender” laws that characterize certain nonbanks as lenders for purposes of their state consumer loan laws.
In addition to enacting “true lender” laws, states may also extend their jurisdiction over bank partnership platforms by broadening the scope of their existing licensing laws to apply to additional substantive activities performed by nonbanks under a bank partnership lending program, including advertising and marketing the loan program, taking applications, and processing and underwriting loans. This expansion can take the form of amendments to existing licensing laws or through regulatory guidance or interpretations. For example, the Ohio Division of Financial Institutions issued guidance in December 2024 that asserts that a nonbank entity that is compensated for arranging a loan of $5,000 or less that is made by a bank must obtain a license under the Ohio Small Loan Act even though that law does not expressly require companies arranging bank-originated loans to obtain a license. We do not expect Ohio to be the last state to aggressively interpret their licensing statutes in an attempt to sweep bank partnership lending platforms within their jurisdiction.
Earned Wage Access
Nonrecourse earned wage access (EWA) programs have emerged in recent years as a popular alternative to more traditional short-term, small-dollar loan products. The treatment of EWA products for regulatory purposes remains somewhat unsettled at the federal and state levels, although the majority of states that have weighed in on the issue have enacted laws or guidance that have concluded, or that characterize, nonrecourse EWA as a non-credit product.
Since 2022, six states have enacted laws or issued regulations that specifically require a license, registration, or other regulatory approval to offer nonrecourse EWA services. Missouri and Nevada enacted their EWA licensing laws in 2023, and Kansas, South Carolina, and Wisconsin followed along in 2024. Most recently, California issued final regulations that require EWA providers to register with the California Department of Financial Protection and Innovation; these regulations took effect on February 15, 2025. Legislation has been introduced in the state legislatures in New York and Ohio that would, if enacted, create EWA licensing regimes in those states and further expand the number of states that license and regulate nonrecourse EWA services.
On the other hand, some states could follow Connecticut’s lead and enact laws that create a structure for state regulators to characterize nonrecourse EWA advances as a loan in an attempt to “fill the void” left by the likely demise of the CFPB’s proposed interpretive rule that would have, if it had been finalized, characterized nonrecourse EWA programs as an extension of credit for purposes of the Truth In Lending Act.
Home Equity Investment
Many homeowners have enjoyed significant home price appreciation during and after the COVID-19 pandemic, in light of the continuing (and perhaps increasing) interest in remote work arrangements. This—coupled with significant increases in interest rates incentivizing homeowners to remain in their homes, enjoying fixed interest rates that are significantly lower than they could obtain today—has created a perfect storm of homeowners who have significant equity in their primary residences. A number of companies that offer home equity investment products have sought to engage with these equity-rich homeowners, who would benefit from access to funds for debt elimination, home improvement, or other personal expenses without incurring debt under a home equity line of credit or closed-end subordinate-lien mortgage loan.
Although many home equity investment products do not create an absolute obligation to repay the amount advanced, several states have recently enacted laws that subject home equity investment providers to mortgage lender licensing laws. Connecticut previously amended its Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators Law in October 2021 to require a mortgage lender license prior to entering into a “shared appreciation agreement.” Maryland enacted legislation, which became effective on July 1, 2023, that amended the Maryland Mortgage Lender Law to specifically require a mortgage lender license in order to enter into home equity option agreements with Maryland consumers. Most recently, Illinois enacted legislation, which became effective January 1, 2025, that amended its Residential Mortgage Lending Act to define a “mortgage loan” to include a nonrecourse “shared appreciation agreement” where the consumer receives money or any other item of value in exchange for an interest or future interest in a dwelling or residential real estate or a future obligation to repay a sum on the occurrence of an event.
Given the rapid expansion of market share for these home equity investment products, we expect additional states to join Connecticut, Illinois, and Maryland in seeking to extend their licensing and regulatory requirements to home equity investment providers.
Residential Solar Leasing
The residential solar panel market has grown rapidly in recent years, with this growth driven by, among other factors, the presence of tax credits and other incentives for consumers to “go solar.” Solar finance companies offer loans or retail installment contracts to allow homeowners to finance buying and installing solar panels. An August 2024 CFPB report noted that solar energy represented 55% of the electricity-generating capacity added to the US grid in 2023, up from 23% in 2018 and just 4% in 2010,1 while the median nationwide installation cost of residential solar panels fell from $3.80 per watt in 2014 to $2.80 in 2023.2
Residential solar financing can take various forms. Some companies will allow consumers to enter into a lease whereby the consumer will pay for the right to use solar panels owned and installed on their property by the lessor. Other companies will offer power purchase agreements (PPAs) under which a consumer agrees to pay for electricity generated by a residential solar system installed on their property but does not own the system itself.
While loans and retail installment contracts are regulated by nearly all (if not all) states in some manner, few states specifically require a license, registration, or notification to enter into leases or PPAs for residential solar equipment aside from a small number of states that have enacted a version of the Uniform Consumer Credit Code and require a notification filing or registration to offer consumer leases in the state (regardless of the type of personal property being leased).
This may be set to change. The Rhode Island legislature recently enacted a “Residential Solar Energy Disclosure and Homeowners Bill of Rights Act,” which, effective March 1, 2025, would require companies leasing residential solar energy systems or entering into PPAs with Rhode Island consumers to register with the Rhode Island Department of Business Regulation annually. Several other states, such as Arizona, Florida, Texas, and Utah, have also enacted laws that require residential solar lenders, lessors, and retailers to provide certain disclosures of the terms of residential solar contracts.
Student Finance
Student lending and servicing has been an area of significant focus for the CFPB and state regulators in recent years. At least 15 jurisdictions have enacted laws that require a license or registration to service at least some or all student loans. In addition to the states that have enacted student loan servicer licensing laws, several states, including California, Colorado, Connecticut, Louisiana, Maine, and Maryland, also recently enacted broad student financing company licensing or registration requirements that apply to companies originating student financing products. These products can include not only traditional student loans but also retail installment contracts and nonrecourse income share agreements. In addition to imposing licensing and registration requirements on student financing providers, these new laws frequently impose extensive recordkeeping and reporting requirements. We expect student lending and servicing to continue to be an area ripe for new and expanded licensing requirements in 2025.
1 Issue Spotlight: Solar Financing | Consumer Financial Protection Bureau
