U.S. bank regulators have announced plans to rescind the 2023 update to fair lending rules, citing ongoing litigation from the banking industry and opting to reinstate the previous requirements under the Community Reinvestment Act (CRA).
U.S. bank regulators have announced their intention to rescind a 2023 update to fair lending rules for banks and reinstate the prior requirements. This decision stems from a legal challenge initiated by the banking industry concerning the new framework.
In a joint statement, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) said they intend to issue a proposal reinstating prior rules enforcing the Community Reinvestment Act (CRA), a 1977 law that mandates banks to serve the credit needs of their local communities.
The updated rules were designed to modernize CRA requirements and reflect the growing prevalence of online banking. The new, more stringent requirements would have compelled banks to provide services to lower-income Americans beyond the areas with physical bank branches, encompassing large online user populations.
Last year, U.S. banking and business groups filed a lawsuit against the regulators, arguing that the new rules exceeded their regulatory authority and could impede lending activities. A Texas judge subsequently blocked enforcement of the new rules.
The CRA, conceived to prevent redlining—a discriminatory practice where banks refuse or offer limited lending services to specific areas or populations, primarily minorities—plays a central role in banks’ overall supervisory performance. Poor CRA grades can place lenders in a “penalty box,” restricting them from engaging in mergers and other transactions.