Banks Can Benefit from Supreme Court Ruling on Chevron Doctrine

The end of Chevron’s reluctance is a boon for banking industry lobbyists, who have stepped up their opposition to the agencies that oversee them in recent years, especially the Consumer Financial Protection Bureau, one of the industry’s most aggressive regulators.

The consumer bureau’s interpretations “may now be subject to more severe attack and may require much more justification than was previously the case,” said Joseph Lynyak, a partner at Dorsey & Whitney who specializes in financial regulation.

While the decision will complicate regulators’ duties, its effects are likely to be familiar to them. The loss of Chevron deference will compound a shift already underway in the lower courts, which in recent years have been receptive to lawsuits challenging the actions of financial regulators. The U.S. Court of Appeals for the Fifth Circuit in particular — and the federal courts under its jurisdiction — has been a major hurdle, preventing the agency from imposing limits on credit card late payments and expanding its interpretation of anti-discrimination laws.

One recent action that could now be ripe for a challenge is the agency’s decision that buy now, pay later lenders are credit card providers, giving buyers the right to dispute charges and demand refunds.

“Because this interpretive rule pushes the boundaries of existing law toward a pure agency interpretation, it will be an attractive target for industry challenges,” said Erin Bryan, another partner at Dorsey & Whitney.

In addition to the CFPB, trade groups representing banks have also sued other federal bank regulators, including the Office of the Comptroller of the Monet and the Federal Reserve. They have challenged these regulators on a wide range of rules, from a sweeping anti-redlining regulation to one that requires banks to release detailed data about their loans to small businesses.

Outside advocacy groups have also developed a habit of suing regulators, though most of their activity has occurred during the Trump administration, when advocates of tighter financial regulation argued that government officials were unfairly loosening rules on banks and other businesses. Their preferred appellate circuit was the Ninth; they often filed federal lawsuits in the Northern District of California, where they expected judges to hear their arguments favorably.

Both sides received a ruling from judges who refused to submit to the regulators’ rules.

“A court can always avoid getting into the Chevron case in the first place by saying a law is not ambiguous, and that’s what happens in the vast majority of cases,” said Randy Benjenk, partner at Covington & Burling which focuses on financial regulation.

“In practice, it is rare for a judge to conclude that a statute is ambiguous and guided by an agency’s interpretation of the law. Judges routinely arrive at their own interpretations that contradict the authorities. That applies to courts across the country, whether in Texas, California or anywhere else.”