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In a scathing dissent , Justice Elena Kagan retorted , “ Some interpretive issues arising in the regulatory context involve scientific or technical subject matter . Agencies have expertise in those areas ; courts do not . Some demand a detailed understanding of complex and interdependent regulatory programs . Agencies know those programs inside-out ; again , courts do not . And some present policy choices , including trade-offs between competing goods . Agencies report to a President , who in turn answers to the public for his policy calls ; courts have no such accountability and no proper basis for making policy .”
Financial Institution Impact
Prior to the court ’ s ruling , banking agencies were not required to consider the best reading of the statute relative to its intent . Rather , agencies could read the statute and apply gap fillers as they saw fit . As long as the agency construction was reasonable , the Chevron test was fulfilled and the agency could apply and enforce its reading . This decision to overturn Chevron puts the courts at the apex of the administrative process and evens the playing field in court . No longer will lawyers challenging an agency interpretation have to successfully argue the statute was unambiguous .
Banking regulators have relied heavily on Chevron deference during the current administration to interpret and create new consumer protection rules . Critics contend in doing so , regulators arrived at outcomes not necessarily foreseen or intended by Congress . For example , banking trade associations sued the banking agencies over the new Community Reinvestment Act on grounds that the rule went beyond what the statute authorized . The CFPB has also been in the crosshairs . Both the credit card late fee rule , and the CFPB ’ s anti-discrimination amendments to the Unfair , Deceptive , Abusive Acts or Practices ( UDAAP ) Examination Manual are under attack as an overreach of authority . reasoned its broad enforcement authority per UDAAP extended to discriminatory conduct in the offering of any financial product or service . The U . S . Chamber of Commerce and other trade groups later sued and won in Texas . The CFPB removed the amendments in September 2023 as a result of the ruling but has since held tight to its interpretation that unfairness encompasses discrimination . The agency appealed the case to the Fifth Circuit Court , which stayed proceeding until the high court ’ s ruling on a case related to whether the CFPBs funding structure was unconstitutional .
In all these instances , the removal of Chevron deference makes it more difficult for the agencies interpretation to survive such legal challenges .
What to Expect
A wave of litigation is expected in the aftermath of Chevron , and for years to come . However , simply because a rule was previously upheld under Chevron does not automatically mean it will be ripe for a challenge . In his opinion , Justice Roberts noted the prospective nature of the court ’ s decision , meaning previously decided cases that relied on Chevron will stand .
Looking forward , Chevron ’ s decimation is likely to spur a flood of challenges to agency interpretation . This could spark greater uncertainty in banking law generally during the challenges ’ prolonged progression through the courts . In the meantime , industry commenters expect compliance officers will have to fashion compliance and risk strategies in the absence of clear direction in some instances . The impact could also force both Congress and the agencies back to the drawing board to pen rules not so nebulous , leading to an even lengthier lead-up process to the issuance of regulations and jointly issued rules , respectively .
Specific to revisions to the UDAAP Examination Manual in March 2022 , the CFPB argued it had authority to include anti-discrimination considerations at the time because discrimination based on a prohibited demographic factor fit UDAAPs definition of unfair . In its argument , the agency
02 | VIEWPOINTS : REGULATORY COMPLIANCE EDITION