Learn about the updated April 2025 lending regulations in the U.S.

Learn more about updated lending regulations

In April 2025, US regulators introduced significant changes to lending rules that could impact banks, financial institutions, and consumers.

Key changes include adjustments to the Supplementary Leverage Ratio (SLR), new reporting requirements for small businesses under ECOA, restrictions on products such as “buy now, pay later” (BNPL), and updates to rules on overdraft and capital requirements. Learn more about them!

Reform of the Supplementary Leverage Ratio (SLR)

The SLR, established after the 2008 crisis, requires banks to maintain capital equal to a specific percentage of their total assets.

In May, the Federal Reserve, FDIC, and OCC jointly announced a plan to reduce this ratio by up to 1.5 percentage points, moving it to a range between 3.5% and 4.5% for the largest banks.

This reduction aims to ease regulatory pressure but does not include the long-awaited exclusion of Treasury securities from asset calculations.

Critics, including analysts from Wells Fargo and Deutsche Bank, argue that without this “carve‑out” for Treasuries, the impact on liquidity and demand for high-quality assets will be limited, with swap spreads continuing to reflect that.

Banking sectors are pushing for an expedited regulatory process, although progress depends on official appointments and formal proceedings at the Fed.

Federal Reserve’s Perspective

In a recent speech, the Fed’s Vice Chair for Supervision, Michelle Bowman, called for a broader review of post-2008 regulations.

She criticized strict requirements such as the expanded SLR, claiming they “disincentivize low-risk activities” and hamper growth while prolonging cost transfers to consumers and businesses. Bowman also suggested a revamp of stress testing, proposing a more personalized and flexible approach.

New Reporting Requirements for Small Business Loans

On April 30, 2025, the CFPB (Consumer Financial Protection Bureau) extended the deadlines for compliance with small business data collection rules under the ECOA (Equal Credit Opportunity Act).

The key dates were postponed and now range from July 2026 (Tier 1), January 2027 (Tier 2), to October 2027 (Tier 3), with the option to begin collecting demographic information up to 12 months prior to the compliance date.

This extension allows institutions more time to prepare, strengthening their systems and collection processes.

During this adaptation period, the CFPB will adopt a lenient supervisory stance, treating good-faith errors as correctable and not subject to immediate penalties.

Reports will be submitted in June 2027 or 2028, depending on the institution’s tier, with semiannual routines aligned with data collected the previous year.

Regulation of “Buy Now, Pay Later” (BNPL)

BNPL products are now classified as open-end credit under Regulation Z of the Truth in Lending Act. Since June 2024, providers must issue formal agreements, disclose billing statements, manage payments, and handle unauthorized charges.

This change represents a significant regulatory tightening and has forced the sector to improve transparency and controls.

BNPL operators sought an injunction, but the CFPB maintained the classification, pending legal clarification. Further adjustments may follow depending on the outcome of these cases.

Overdraft Service Restrictions

Simultaneously, institutions with more than $10 billion in assets must classify overdraft services as “covered credit” under Regulation Z, triggering strict disclosure obligations.

This rule requires greater transparency about fees and conditions but has also raised concerns that banks may eliminate or limit overdraft products, affecting consumers who rely on such services.

Fed’s Review of Capital Buffers

On April 17, 2025, the Fed proposed changes to reduce volatility in the requirements known as the “stress capital buffer.” The proposal emphasizes smoothing out adjustments following stress testing, aiming to prevent abrupt shifts in capital demands on banks.

This revision is part of an effort to make the regulatory environment less prone to sudden shocks and more predictable for both the financial sector and its users.

What Changes in Practice for Banks and Consumers?

The changes promote a more balanced and modern regulatory environment. The reduction of the SLR and stress capital buffers offers room for credit expansion, but without the exclusion of Treasuries, the real benefit may be limited.

The extension of ECOA reporting requirements provides time for preparation but delays transparency and analysis of discriminatory practices in small business lending.

Meanwhile, the reclassification of BNPL and stricter overdraft rules reflect a strong trend toward consumer protection, emphasizing service continuity and cost clarity.

The April 2025 updates reflect a regulatory rebalancing effort: less prudential rigidity, more borrower protection, and a transitional path for institutions.

Although some changes may take effect gradually or softly, the cumulative impact on credit market stability and customer service quality will be significant.

This phase reshapes the U.S. financial landscape, demanding quick adaptation from banks and renewed attention from all stakeholders, regulators and regulated alike.

Written by

Juliana Raquel