ABA Response to the RFI on Deregulation

ABA made the following recommendations on a form OMB asked the public to use:

1. Rescind the 2023 CRA final rule.

What is the background for the regulation being rescinded?

On October 24, 2023, the federal banking agencies (the OCC, FDIC, and FRB) issued a final rule, seeking to modernize their 28-year-old Community Reinvestment Act CRA) regulations (the 2023 Rule). Among other things, the 2023 Rule significantly expanded the geographies where banks' CRA performance is evaluated and established new metrics and benchmarks for assessing performance. The 2023 Rule was effective on April 1, 2024. The compliance date for most provisions (those involving new tests, definitions, and data collection and maintenance requirements) is January 1, 2026. Reporting requirements are applicable on January 1, 2027.

Seven trade associations challenged the 2023 Rule in court, arguing that it exceeds the agencies' statutory authority and is arbitrary and capricious in violation of the Administrative Procedure Act. On March 29, 2024, the U.S. District Court for the Northern District of Texas issued a preliminary injunction that enjoined the agencies from enforcing the rule and extended the rule's "effective date of April 1, 2024, along with all other implementation dates…day-for-day, for each day that the injunction is in place." Banks continue to be subject to and examined under the agencies' 1995 CRA Rule during the 2023 Rule's transition period, which was extended by the court's injunction.

On March 28, 2025, the agencies issued a joint statement announcing their intent to issue a proposal to rescind the 2023 Rule and reinstate the prior CRA framework "in light of pending litigation." The Fifth Circuit stayed the case following the agencies' announcement.

Explain the Reasons for the Rescission.

The agencies should rescind the 2023 Rule because it is inconsistent with the CRA statute, is arbitrary and capricious, and is overly burdensome.

The 2023 Rule assesses banks' activities outside of the locations where they maintain a physical presence and accept deposits, thereby ignoring the geographic limits that Congress incorporated into the CRA statute. In addition, the 2023 Rule disregards the CRA's focus on credit products by also assessing a bank's deposit products.

The 2023 Rule is also arbitrary and capricious because it is not supported by reasoned decision making and deprives banks of advance notice regarding the areas and products that will be assessed and the market benchmarks against which bank performance will be evaluated. Further, the rule's implementation costs would be enormous, both at the implementation stage and on an annual basis going forward. Yet, the banking agencies did not offer any predictions or evidence that the rule will lead to more of the type of lending that the CRA was designed to encourage. To the contrary, the banking agencies turn a blind eye to the substantial likelihood that the rule would disincentivize lending in locations where banks do not have a physical presence.

The 2023 Rule is also extraordinarily and unnecessarily complex. It required 649 three-columned pages to articulate and contained approximately 60,000 words of rule text as well as more than 40 benchmarks and 20 metrics. It is doubtful that anyone comprehends the rule as a whole. In addition, despite the length and complexity of the 2023 Rule, significant aspects of the new CRA regulatory framework remain unfinished.

For these reasons, the agencies should publish a notice of proposed rulemaking to rescind the 2023 Rule and reinstate the 1995 CRA Rule (60 Fed. Reg. 22156 (May 4, 1995)), as amended by the agencies' 2016 amendments (82 Fed. Reg. 5354 (January 18, 2017)).

Download the letter to read the full text.