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Use of CRA to Undo Regulations

April 30, 2024

On April 17, the House Financial Services Committee voted to pass, along party lines, Congressional Review Act (CRA) resolutions that would nullify regulations from the Consumer Financial Protection Bureau, the Securities and Exchange Commission, and other financial regulators.

What it is. The CRA allows a new Congress to nullify rules issued within the last 60 legislative days of the prior Congress. The exact calendar for this period is somewhat of a confusing calculus, but will likely start in May or June 2024 for the current Congress.

Since CRA resolutions are subject to presidential vetoes, we see more of this activity in potential presidential transition years.

Why it matters: As noted by American Banker, the use of the CRA is:

“An accelerating trend, and not specific to bank regulation. But in the last few weeks, it's become particularly noticeable in that arena.”

The application of the CRA does not only undo these rules, but also prevents regulators from issuing similar ones, thereby reining in regulatory influence in certain areas.

What they’re saying: Employing the CRA to attempt to nullify rules can also be a messaging tool. According to American Banker:

“The CRA resolutions make it easier for Republicans to communicate where a future Republican administration would want to focus its energy. It also forces Democratic lawmakers, particularly those in vulnerable seats in the 2024 election season, into potentially politically unpopular votes.”

While presidential transition years often see an increase in CRA resolutions, current activity has eclipsed typical activity.

The bottom line: As reported in several CREFC Policy and Capital Markets Briefings, uncertainty regarding financial regulation has grown while the courts weigh in on an increasing number of final regulations. The heightened use of the CRA will likely add to that uncertainty.

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