The Supreme Court in a 6-3 vote June 28 squashed a legal precedent that conservatives have attacked for decades, known as the "Chevron deference."
The court ruled on cases brought by Atlantic herring fishermen in New Jersey and Rhode Island, who contested a fee requirement. Lower courts had relied on the Chevron decision to uphold a 2020 National Marine Fisheries Service rule mandating that herring fishermen cover the costs of government-required observers who monitor their fish catch.
Conservative and business interests strongly supported the fishermen’s appeals, anticipating that a court reshaped during Republican Donald Trump’s presidency would deliver another setback to the regulatory state.
"Today, the court places a tombstone on Chevron no one can miss," Justice Neil Gorsuch wrote.
The deference, set in 1984 and called Chevron v. Natural Resources Defense Council, gave federal agencies wide powers to interpret laws and decide the best ways to apply them. Additionally, if Congress were to pass a law where something was unclear - or posed a “gap” - the agency was responsible for filling the gap.
The decision served as the foundation for sustaining thousands of regulations across numerous federal agencies. However, it has long been criticized by conservatives and business groups who contend that it bestows excessive power upon the executive branch, often referred to by critics as the "administrative state."
In ending the deference, the conservative-majority court has slashed and severely weakened the powers of agencies, namely the Environmental Protection Agency.
Liberal Justice Elena Kagan dissented, saying that the ruling elevates the Supreme Court’s power over other branches of the U.S. government, implying an imbalance in government branches.
Of course, the decision could bleed into the mortgage industry, namely the Consumer Financial Protection Bureau (CFPB) which has been long criticized for its structure and funding. Marty Green, principal at mortgage law firm Polunsky Beitel Green, believes the decision will be welcomed by the industry.
"The U.S. Supreme Court’s decision overruling the Chevron doctrine will be welcome news to the mortgage industry. One of the principal industry concerns about the vast power granted to the Consumer Financial Protection Bureau was that these powers were too insulated from review, particularly because the Chevron doctrine would require courts to give deference to the CFPB’s interpretations of statutes,” Green wrote in a statement. “[The] decision by the Supreme Court restores equilibrium by no longer requiring courts to place undue weight on a federal agency’s interpretation of laws and restoring the interpretive role fully to the courts where it belongs."
In conjunction with Green, Rob Nichols, president and CEO of the American Bankers Association, released a statement about the ruling’s implications.
“The ruling sends a crystal-clear message to federal agencies that their powers are not unlimited,” he wrote. “This is an important win for accountability and predictability at a time when agencies are unleashing a tsunami of regulation—in many cases clearly exceeding their statutory authority while making it harder for banks to serve their customers. We will continue to fight to ensure that bank regulators follow the law every time they exercise their powers.”
Lindsey Johnson, CEO of the Consumer Bankers Association, an advocate of lighter regulation, also commented on the reversal.
”We would not be at this point today if government agencies were more prudent and consistent about staying within their statutory authorities, grounding their rulemakings in empirical facts, and heeding appropriate procedural safeguards," Johnson wrote in a statement. "Instead, too frequently, our regulators appear to be chasing headlines and short-term political wins.”
Future Implications
Peter Idziak, senior associate attorney at Polunsky Beitel Green, says that one of the ideas from the overturn is that the CFPB will lose in more challenges than when Chevron was intact. "The CFPB has largely been led by Democratic-appointed administrations and the [mortgage] industry tends to favor Republican administrations," Idziak said. "There's already uncertainty since now judges will take a fresh look at their own interpretations of regulations on a case by case basis, and more uncertainty if we have a Republican administration in the future."
Idziak says this could cause turbulence for those in the financial services realm. "If regulations are overturned or overruled, you have to change the systems you put in place to accommodate those regulations," he added.
"Right now," Idziak continued, "there's a lot of guesses because Chevron impacted and impacts many administrative agency actions. And it'll be interesting to see how the CFPB's ongoing cases respond to the change."
