Banking industry groups viewed Friday’s U.S. Supreme Court ruling as a potential victory for their members, who have been the targets of increased regulation in recent years.
The nation’s highest court overturned the decades-old Chevron doctrine, which since 1984 has held that when laws are ambiguous, courts will defer to regulatory interpretations of statutes, including those enacted by bank regulators.
The Chevron Doctrine was rejected by majority decisions in two similar cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. U.S. Department of Commerce.
The Chevron doctrine “violates the Administrative Procedure Act’s injunction that ‘courts of review,’ not bodies that review conduct, ‘decide all relevant issues and law’ and ‘interpret statutory provisions.’ It requires courts to ignore, rather than follow, the ‘interpretation the court would have reached’ if they had exercised their own discretion as required by the APA,” the justices wrote Friday.
Going forward, regulatory actions that lack clear authority from Congress may face more legal challenges.
“It will take years for today’s historic decision to permeate not only the realm of financial regulation, but every area in which the administration impacts regulated companies and American consumers,” Lindsey Johnson, president and CEO of the Consumer Bankers Association, said in a prepared statement Friday.
“But it’s clear that we wouldn’t be in the situation we are in today if agencies had been more careful and consistent in adhering to their statutory authority, basing their rules on empirical facts, and heeding appropriate procedural safeguards,” Johnson said. “Instead, regulators too often seem to chase headlines and short-term political wins.”
Rob Nichols, president of the American Bankers Association, said the Supreme Court’s message on Friday was that federal agencies’ powers “are not unlimited” and that it is leaning toward the idea that they must curtail regulations that, in many cases, clearly exceed their authority.[s] The statutory powers of banks have been restricted, making it difficult for them to serve their customers.”
Dorsey & Whitney partner Joseph Rignac said in an emailed statement that overturning the Chevron principles “will more fairly level the playing field so that interested industry participants can challenge agency interpretations. This balance will be most evident when agencies have expertise and industry participants have comparable expertise that should be evaluated by the courts.”
With this decision, the Supreme Court deemed the courts “the appropriate forum to decide questions of law involving ambiguities in statutes and regulations,” Linyak said, “but courts across the country are likely to be overrun with private parties who will litigate and relitigate over agency interpretations, potentially resulting in conflicting decisions in lower courts.”
He said the Consumer Financial Protection Bureau could face more challenges to its regulations, especially since it is led by a single director who is not a lawyer.
Mike G. Silver, a consumer finance lawyer at Husch Blackwell in Washington, D.C., who worked at the CFPB for 12 years, said he believes the decision will have less of an impact on the CFPB than other agencies because it is a younger agency and its regulatory scope is smaller than other federal regulators.
“The CFPB is a very young agency, only 12 and a half years old, so there isn’t a lot of interpretive guidance for courts to follow,” Silver told Banking Dive.
Silver said the impact is “fairly unclear in the short term” and that the decision was not a surprise.
“The Court has expressed discomfort with Chevron for years. As Chief Justice Roberts wrote in his opinion, the Court has not relied on Chevron in any decision for nearly a decade. Rather, the problem lies with lower courts that continue to rely on Chevron,” he said.
The decision is not retroactive and does not call into question prior cases that relied on the Chevron framework. Regarding the agency’s decisions, Silver said he doesn’t believe the non-retroactive provisions are “complete” and that rules previously enacted by any agency could be challenged in new litigation.
“It basically comes down to when there are old cases that the agency has acknowledged; [and] “Just because they gave him deference, it says the court can’t simply assume it’s invalid,” Silver said, “but at the same time, when you don’t have old cases or you have a mix of cases, it seems like there’s room, at least in some cases, for the court to find that long-standing regulations exceed their statutory authority.”
