Our Take: financial services regulatory update – March 28, 2025

• What happened? On March 28^th, the Fed, FDIC and OCC (the Agencies) released a joint statement announcing a forthcoming proposal to rescind the Community Reinvestment Act (CRA) rule issued in October 2023 and reinstate the prior CRA framework.
• What did the October 2023 rule do? The rule made a number of changes to the CRA framework including (1) revising thresholds for small, intermediate and large banks; (2) expanding the delineation of assessment areas beyond the areas surrounding physical branches to new “Retail Assessment Areas”; (3) defining categories of activities that support community development; and (4) requiring large banks to collect and report volumes of data on deposits and retail lending to be used in cumbersome and complex tests for peer comparison.
• What’s next? The proposal to rescind the October 2023 rule and reinstate the previous CRA framework is expected to [KA1] be subject to a notice and comment period before becoming final. The joint statement notes that the Agencies “will continue to work together to promote a consistent regulatory approach on their implementation of the CRA.”

Our Take

Back to the drawing board. The rescission of the 2023 CRA rule was expected following legal challenges, industry opposition, and recent statements from regulators. While the industry, regulators, and community groups all agree that modernizing the 48-year-old CRA to account for digital banking and provide transparency into activities that meet CRA obligations is past due, many objected to the way the rule modified assessment areas, the complexity of required calculations and data collection, and the supervisory discretion afforded by the rule. The Agencies have stated that they will work together to promote a consistent CRA approach but considering the challenges of coordination and complex considerations necessary to propose a new framework, alongside expected cuts to agency staff, we do not expect to see a new proposal any time soon. In the meantime, concerns with the pre-October 2023 CRA framework remain, including an outdated assessment area framework in the age of digital banking and an informal – and often inconsistent – process to clarify CRA activities. However, financial institutions are well accustomed to these challenges and are expected to [KA1] be relieved to maintain their mature CRA compliance programs – for now.

• What happened? Following his confirmation as FHFA Director on March 14th, Bill Pulte has taken a number of steps to move the agency in a new direction, including by rescinding several actions from the previous Administration and making personnel changes.
• What actions did the FHFA rescind? Over the past week, Pulte has rescinded a number of actions taken under the previous Administration, including:
  • A directive requiring that Fannie Mae and Freddie Mac require borrowers purchasing multifamily properties to meet minimum standards for rental payment flexibility and lease notices;
  • An order establishing FHFA expectations for compliance with protections against unfair and deceptive acts and practices;
  • An order that Fannie Mae and Freddie Mac adopt climate risk management frameworks;
  • An order to terminate Special Purpose Credit Programs (SPCPs) providing underwriting flexibility and financial support to certain borrowers;
  • Certain requirements to engage in equitable housing finance planning and reporting; and
  • Borrower education tools around energy efficiency.

These actions follow personnel decisions by Pulte that include dismissing several Board members and executives at Fannie Mae and Freddie Mac and a return-to-office mandate. Pulte was also installed at the Board Chair of both Fannie Mae and Freddie Mac.

• What’s next? The actions taken over the past week are effective immediately. While Pulte acknowledged in his confirmation hearing that bringing Fannie Mae and Freddie Mac out of conservatorship is an important goal, he has also stated that it will take some time to do so with due care to confirm safety and soundness.

Our Take

Pulte has set a course for the FHFA in line with the Administration’s priorities. The steps taken by Pulte over the past two weeks follow now-familiar themes from speeches and actions at other financial agencies, including loosening “burdensome” requirements, eliminating climate and “DEI” expectations, and refocusing on core agency missions. While many of these actions appear at face value to significantly reduce compliance expectations and eliminate certain programs, their practical impact is expected to be more limited. For example, bank supervisors and state attorneys general can continue to enforce against unfair, deceptive and abusive acts and practices; rental flexibility and lease notice requirements are required by many states; and climate risk remains an important consideration under areas such as credit risk. In what has become a theme under the new Administration, while agency expectations may be categorized differently, the outcome of firms’ risk decisions and consumer practices still matter.

These notable developments hit our radar recently:

FDIC rescinds prior notification crypto requirement. On March 28^th, the FDIC rescinded its 2022 Financial Institution Letter (FIL) that established a requirement for FDIC-supervised institutions that wish to engage in crypto-related activities to notify the FDIC before doing so. The rescission is accompanied by clarification that FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior approval.

CFTC withdraws crypto guidance. On March 28^th, the CFTC withdrew two staff advisories, one on virtual currency derivative product listings and another on risks related to clearing digital assets. The CFTC states that the withdrawals reflect additional experience with virtual currency derivatives and to clarify that its regulatory treatment of these products may [KA1] not vary from its treatment of others.

SEC stops defending climate disclosures. On March 27^th, the SEC voted to end its legal defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions. Following the vote, the agency sent a letter to the Eighth Circuit Court of Appeals stating that the agency withdraws its defense of the rules.

CFPB to settle late fee rule litigation. On March 24^th, a federal judge in the Northern District of Texas Federal Court granted the CFPB 30 days to settle a lawsuit challenging the agency’s credit card late fee rule. CFPB attorneys have stated that they are optimistic that an agreement with the plaintiffs can be reached.

CFPB to revoke “buy now, pay later” rule. On March 26^th, the CFPB requested to stay litigation against the agency’s interpretive rule that would extend credit card protections to “buy now, pay later” purchases, explaining that the agency intends to revoke the rule.

CFPB vacates settlement against mortgage lender. On March 26^th, the CFPB announced that it will vacate a settlement against a mortgage lender and return the associated monetary penalty. As part of the announcement, the agency criticized the previous Administration finding evidence of discrimination based on racial disparities in mortgage applications as opposed to specific instances of discriminatory conduct.

Senate votes to overturn CFPB overdraft rule. On March 27^th, the Senate passed a resolution under the Congressional Review Act (CRA) to overturn a CFPB rule limiting overdraft fees. The House must also approve the resolution for the rule to be overturned. If the rule is struck down, the CFPB would be prohibited from issuing a “substantially similar” rule without Congressional approval.

Acting Comptroller speaks on innovation and affordable credit. On March 27^h, OCC Acting Comptroller Rodney Hood spoke on the role of innovative financial technology to promote financial inclusion for underserved communities. He explained that the agency will refocus initiatives such as Project REACh to focus on financial inclusion, for example by developing alternative credit metrics for consumers lacking a credit score.

Uyeda and Cook speak at SIFMA conference. At this week’s SIFMA C&L Annual Seminar, Acting SEC Chairman Mark Uyeda and FINRA President Robert Cook offered remarks on their accomplishments and future policy goals. Uyeda highlighted actions to delay and revisit rulemaking such as expanded central Treasury clearing and urged the industry to provide feedback. Cook outlined priorities including updating the FINRA rulebook, seeking amendments to securities lending and TRACE reporting, and helping firms with fraud and cybersecurity protections.