On June 28, 2024, in Loper Bright Enterprises v. Raimondo, the United States Supreme Court overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), which required courts to defer to “permissible” interpretations of statutes by agencies that administer them. The decision has enormous implications for the Consumer Financial Protection Bureau (“CFPB”) and the companies it regulates.
Under Chevron, courts were required to engage in a two-step analysis when interpreting statutes administered and interpreted by federal agencies. First, they were to assess whether Congress had clearly and directly spoken to the interpretive question before the court. If not, and if the statute was silent or ambiguous on the issue at hand, they were required to defer to the agency’s interpretation of the statute so long as the agency’s interpretation was “permissible.” In practice, this rule created a significant hurdle for challenges to agency interpretive rules and guidance, as there effectively was a strong presumption that the agency was correct. Given the significant cost and risk of litigating against the government, Chevron deference chilled attempts to challenge agency overreach, while making the challenges that were pursued more difficult to win.
The elimination of Chevron deference impacts all federal agencies and the companies they regulate, but it is particularly impactful with respect to the CFPB. Under the current Director, the CFPB has engaged in an unprecedented effort to reshape consumer financial protection laws through interpretive rules and agency guidance, quite frequently “pushing the envelope” to effect aggressive legal changes through regulatory rather than Congressional action. For example, the CFPB recently issued an interpretive rule finding that digital user accounts for “buy now, pay later” loans, which are closed-end loans, are actually credit cards under Regulation Z. Earlier, the CFPB brought an enforcement action against a mortgage lender alleging violations of the Equal Credit Opportunity Act (“ECOA”) based on alleged acts to discourage prospective applicants from applying for credit. The CFPB relied on Regulation B’s references to “prospective applicants,” which do not appear in ECOA itself, leading to dismissal of the action at the district court level; the case is now on appeal to the Seventh Circuit. In both of these matters, Chevron deference gave the CFPB a significant advantage. There are many other examples, including, for example, with respect to open banking, credit reporting, debt collection, and a new registry commonly referred to as the “public shaming database.”
The elimination of Chevron deference importantly does not preclude agencies from offering interpretations of statutes they administer. Furthermore, the decision did not eliminate Skidmore deference, which permits courts to defer to agencies in appropriate cases based on their specialized experience. It does, however, leave the job of interpreting federal statutes solely to the courts. For regulated entities seeking to challenge administrative overreach, this is an extremely positive development.
Should you have any questions or wish to discuss the foregoing, please contact either of the authors or the Manatt professional with whom you work.