How the Congressional Review Act will Impact Financial Rules in 2025
Authored by Bryan Bashur
Republican control of the U.S. House, Senate, and executive branch opens the opportunity to repeal several financial regulations under the Congressional Review Act (CRA). In 1996, the CRA was enacted as a part of the larger Small Business Regulatory Enforcement Fairness Act. This statute authorizes Congress to introduce joint resolutions of disapproval to nullify final rules that have been published in the Federal Register and submitted to Congress.
There are notable rules finalized by the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC) that could be targeted by Congress under the CRA next year. Pursuant to the “lookback” rules of the CRA, any Biden administration rules finalized sometime between the end of July or August 2024 and the end of the 118thCongress may be eligible to be nullified via the CRA in the first few months of the 119th Congress.
A final rule is declared null and void if both the House and Senate pass a joint resolution of disapproval by a simple majority and the President signs it. Both chambers can only override a Presidential veto with a two-thirds majority. If Congress disapproves of a rule and it is nullified, the executive branch will be prohibited from issuing any substantially similar rules to the one that Congress rejected “unless it is specifically authorized by a subsequent law.” Judicial review of determinations made under the CRA are also prohibited by the statute.
Joint resolutions of disapproval can be introduced anytime between the end of January 2025 and sometime in April 2025 and still fall within the guidelines of the “lookback” provisions of the CRA. Under the CRA, Congress has 60 legislative days to introduce a joint resolution of disapproval. The 60 days includes weekends and holidays but does not include a period of more than three days when either chamber or both chambers of Congress are in recess under a concurrent resolution of adjournment. The “lookback” provision allows a new Congress to revisit a final rule if the current congressional session adjourns sine die in the middle of the 60 days of CRA consideration. This ensures Congress gets the full time allotted under the CRA to consider agency rulemakings.
The CFPB’s rule implementing section 1033 of the Dodd-Frank Act is eligible for nullification next year. The so-called “open banking rule” was ostensibly promulgated to allow consumers greater access to their financial data. However, banking trade associations immediately sued the CFPB, arguing that “the CFPB overstepped its statutory authority and finalized a rule that jeopardizes consumers’ privacy, financial data and account security.” Conversely, Chairman Patrick McHenry (R-N.C.) of the House Committee on Financial Services described the rule as a “promising step forward.” Litigation over the rule will likely bleed into 2025 and continue after CFPB Director Rohit Chopra is replaced by the Trump administration. A new CFPB director could pause their defense of the rule, or Congress could introduce a joint resolution of disapproval anytime between the end of January and sometime in April.
Policies and guidelines governing mergers and acquisitions (M&A) will also likely see the chopping block. The OCC’s final rule and the FDIC’s statement of policy on bank M&A are likely eligible to be overturned by Congress next year. The FDIC’s guidance document could be considered a rule under the CRA. For additional clarification, Congress could ask the Government Accountability Office (GAO) for an opinion. Earlier this year, Congress asked GAO to give an opinion on whether the SEC’s Staff Accounting Bulletin (SAB) 121 constituted a rule under the CRA. The GAO ultimately found that SAB 121 met “the CRA’s definition of rule and should have been submitted” to Congress. If GAO affirms that the FDIC’s merger guidelines qualify as a rule under the CRA then Congress will have the green light to reverse M&A reforms that apply to state-chartered banks that are not members of the Federal Reserve System in addition to reversing the OCC M&A reforms that apply to nationally-chartered banks.
The FTC’s amendments to the Hart-Scott-Rodino (HSR) Antitrust Improvements Act could also be targeted by Congress. The rule creates an expansive regime for disclosing information and documents related to premerger filings. Although scaled back from the proposed rule, the final rule still imposes new reporting requirements, such as disclosures to the FTC on prior acquisitions and geographic data on “parties’ overlapping operations, including franchisees’ locations and additional industry codes requiring ‘street-level’ reporting.”
The SEC’s final rule governing open-end mutual funds will also be eligible to be repealed. Although the most controversial provisions of the proposed rule—mandated swing pricing and the “hard close”—were excluded from the final rule, there are still concerns about making fund reports public on a monthly basis. One SEC commissioner stated that the disclosures could create “frontrunning and other predatory trading practices” that could harm the fund and retail investors. Disagreements on policy could inspire a joint resolution of disapproval next year.
As the 118th Congress approaches adjournment sine die, the opportunity for regulatory rollbacks is becoming clearer. There could be more rules finalized between now and the end of the year that would also be eligible for congressional scrutiny next year, but as it stands now there are ample opportunities to roll back major pieces of the Biden administration’s regulatory agenda.
