2025 brings significant regulatory changes affecting both consumer and commercial lenders. New laws and rules—from enhanced consumer protections to stricter capital standards—are in motion, requiring lenders to track new legislation, comply with key deadlines, and adjust to updated fair lending, capital, and reporting requirements.
Recent shifts at the Consumer Financial Protection Bureau (CFPB) have introduced additional uncertainty. Following political and leadership changes, the CFPB’s operations have been scaled back, causing delays in rule implementation and enforcement actions. However, finalized rules remain in place, and state regulators, along with other federal agencies like the Federal Trade Commission (FTC), the Department of Justice (DOJ), and banking regulators (FDIC, OCC, and the Federal Reserve), are stepping in to fill the gap. Lenders must be prepared for increased state-level oversight and stricter enforcement of consumer protection laws.
Legislative Changes and Proposals
Federal Interest Rate Cap Proposals
Federal lawmakers are also considering capping credit card APRs at 10%, which would reduce profitability for lenders relying on high-interest products. While this proposal faces strong industry opposition, lenders should model alternative pricing structures and develop strategies to maintain access to credit under tighter profit margins.
Fair Lending for All Act
The Fair Lending for All Act, introduced in Congress, seeks to expand the Equal Credit Opportunity Act (ECOA) to add sexual orientation, gender identity, and geographic location as protected classes in credit decisions, proposing criminal penalties for willful credit discrimination. While the bill is still pending, lenders should review underwriting policies to ensure they are free from bias and provide staff training on inclusive lending practices.
Stablecoin and Fintech Legislation
Bipartisan efforts to regulate stablecoins and other digital assets could influence banking charters and partnerships with fintech lenders. If enacted, these rules would require lenders to adjust internal controls and establish risk management frameworks for handling digital assets.
State-Level Licensing Requirements
With reduced federal oversight from the CFPB, state-level regulations are becoming more prominent. Many states require unique licenses and compliance processes, making multi-state operations more challenging.
Consumer Lending Updates
Medical Debt Credit Reporting Rule
The CFPB’s rule banning the inclusion of medical debt on consumer credit reports and prohibiting lenders from using medical debt in credit decisions was expected to take effect on March 17, 2025. While enforcement may be delayed, lenders should still prepare by updating underwriting models to exclude medical debt data and training staff to adjust to the revised credit scoring approach.
Credit Card Late Fees Cap
A rule capping credit card late fees at $8 for large issuers took effect in mid-2024. By 2025, credit card lenders must comply with this cap unless they can demonstrate that higher costs are justified. Lenders should adjust billing systems and cardholder agreements to reflect the new fee structure and focus on strategies to reduce late payments through customer outreach and proactive reminders.
Payday and Small-Dollar Lending Rule
The Payday and Small-Dollar Lending Rule, which limits lenders to two consecutive attempts to debit a borrower’s account after a failed payment, will take effect on March 30, 2025. Lenders must carefully track payment attempts and obtain borrower authorization before attempting additional debits.
Overdraft Fee Rule
The Overdraft Fee Rule requires large banks (over $10 billion in assets) to either cap overdraft fees at $5, charge only cost-recovery fees, or treat overdrafts as credit lines requiring Truth in Lending Act disclosures. Affected banks should evaluate the financial impact of the new rule, adjust fee structures accordingly, and update customer disclosures to reflect the revised terms.
PACE Loans – Mortgage-Like Protections
Lenders offering Property Assessed Clean Energy (PACE) loans must comply with new federal standards treating these loans like mortgages. This includes providing Truth in Lending Act disclosures and conducting ability-to-repay assessments. Loan documentation and systems should be updated to generate the required disclosures.
Fair Lending and Consumer Justice
Nonbank Lenders Registry
Fair lending remains a focus of regulators even with the CFPB’s reduced activity. A new rule creates a public registry of nonbank lenders under consent orders or judgments for violating consumer protection laws. Initial registration for larger lenders began in January 2025, with a broader deadline in April 2025. Lenders under existing orders should consult with legal counsel to confirm registration requirements and prepare submissions to the CFPB’s registry.
Redlining and Algorithmic Bias Enforcement
The DOJ and state regulators are also increasing scrutiny of mortgage and auto lending patterns, targeting discriminatory practices like redlining. Lenders should conduct regular audits of loan approval rates, pricing, and terms to identify and address disparities. Enhanced monitoring of loan data can help prevent inadvertent bias and reduce the risk of regulatory action.
Data Broker Regulation and AI Use
A proposed CFPB rule would regulate data brokers as consumer reporting agencies under the Fair Credit Reporting Act. If finalized, this would require lenders to ensure that alternative credit data sources meet the same accuracy and privacy standards as traditional credit reports. Lenders using machine learning or algorithm-based underwriting models should test for unintended bias and be prepared to provide detailed explanations for credit denials.
Commercial Lending Updates
Small Business Lending Data Collection (1071 Rule)
The CFPB’s 1071 Rule, requiring lenders to collect and report data on small business loan applications, was scheduled to take effect on July 18, 2025, for larger lenders. However, this deadline may be delayed due to the CFPB’s reduced status. The rule mandates collection of demographic information, loan terms, and decision outcomes, with the data to be reported annually. Lenders should continue preparing by updating loan application systems, training staff on data collection rules, and ensuring privacy safeguards are in place.
Community Reinvestment Act (CRA) Modernization
Community Reinvestment Act (CRA) modernization rules take effect on January 1, 2026, but banks are using 2025 to prepare. The new CRA framework expands assessment areas and strengthens requirements for lending to underserved communities. Banks should identify new assessment areas and adjust outreach and lending strategies to improve CRA performance under the new evaluation standards.
Basel III Endgame – Capital Requirement Increases
Capital requirements under Basel III Endgame will begin phasing in on July 1, 2025. Large banks face higher common equity Tier 1 capital requirements, which could increase by an average of 16%. Lenders should conduct capital stress testing and adjust lending portfolios to manage the increased cost of holding capital.
Key Deadlines to Watch
March 17, 2025 – Medical Debt Credit Reporting Rule (delayed)
March 30, 2025 – Payday Lending Rule (on track)
July 1, 2025 – Basel III Capital Requirements (on track)
July 18, 2025 – Small Business Lending Data Collection (delayed)
Compliance Strategy for 2025
To navigate these changes, lenders should take a proactive approach to compliance:
- Monitor federal and state regulatory changes: State-level enforcement will likely increase in the absence of full CFPB activity.
- Enhance fair lending monitoring: Conduct regular audits of loan data to identify potential disparities in approval rates, pricing, and terms.
- Strengthen data privacy and security: Ensure compliance with pending open banking rules and data broker regulations.
- Adjust pricing and capital strategies: Prepare for higher capital requirements under Basel III and potential credit card rate caps.
- Train staff: Provide staff with updated training on new fair lending rules, CRA requirements, and CFPB guidelines.
- Partner with expert licensing services: Using a service like Cornerstone can help manage state-level licensing requirements, ensuring timely renewals and reducing administrative burdens.
By staying informed and proactive, lenders can successfully manage the challenges of 2025’s regulatory environment.
