The most common and most likely answer to this crossword clue is the 7 letter word RECEDED
I've seen this crossword clue in The Times
R
E
C
E
D
E
D
More clues leading to the result RECEDED
Buddy explains!

The straight part
We know that "faded" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case faded = receded.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does RECEDED mean?
RECEDED verb- To move back; to retreat; to withdraw.
- To cede back; to grant or yield again to a former possessor.
- To take back.