Loper, Chevron, and The Accompanying Presidential Memo
Growing up, when my family could not agree upon a set house temperature, we deferred to our dad's frigid thermostat authority…until dad went to work. We'd go to our mom to overrule his decision, and it worked out well for us kids…until dad got that exorbitant electric bill. With the upending of longstanding precedent concerning thermostat control, our family economy was greatly impacted: we never made it to Disney World.
Similarly, credit unions should be aware of a few recent legal occurrences that will undoubtedly shift the way courts interpret ambiguous or vague statutes or rulemakings: no more relying on a federal agency's interpretation. This blog will highlight the Supreme Court's decision in Loper to overrule Chevron, the relevant Presidential Memorandum, and how the Administration will likely implement the Loper decision throughout the federal agencies which govern credit unions.
Loper Overturned Chevron
In June 2024, the Supreme Court's Loper decision overturned 40 years of legal precedent established by Chevron U.S.A., Inc. v. Natural Resources Defense Council (1984), on the grounds that it conflicts with the Administrative Procedure Act (APA). The APA governs the administrative actions of federal agencies, including NCUA and CFPB.
Under Chevron, it established a court's requirement to defer to a federal agency's reasonable interpretation of an ambiguous or vague statute or rulemaking the agency enforces, also known as the "Chevron Deference." Any ambiguity or vagueness of a regulation was a license from Congress for the agency to broadly interpret law, which in turn limited a federal court's ability to review the federal agency's legal interpretation.
With the overturning of Chevron, the burden of interpretating ambiguous or vague regulations passes to the judicial branch (courts) and away from the executive branch (federal agencies). That is, when there is an ambiguity or vagueness in the law, a court does not have to defer to an agency's interpretation.
The Presidential Memorandum
Amongst the litany of Executive Orders, you will find a fairly new executive directive to repeal unlawful regulations. In its stated effort to promote economic growth and American innovation, the Trump Administration declares that removing regulations rendered unlawful by Supreme Court decisions is a top priority.
"In recent years, the Supreme Court has issued a series of decisions that recognize appropriate constitutional boundaries on the power of unelected bureaucrats and that restore checks on unlawful agency actions. Yet, despite these critical course corrections, unlawful regulations - often promulgated in reliance on now-superseded Supreme Court decisions - remain on the books."
The Presidential Memorandum instructs executives of federal agencies to review recent case law, including Loper, pursuant to Executive Order 141219, which "prioritizes eliminating unconstitutional or unauthorized rules and limits enforcement of regulations that extend beyond clear statutory mandates," and begin repealing them within a prescribed timeframe:
"Accordingly, I hereby direct:
- Following the 60-day review period ordered in Executive Order 14219 to identify unlawful and potentially unlawful regulations, agencies shall immediately take steps to effectuate the repeal of any regulation, or the portion of any regulation, that clearly exceeds the agency's statutory authority or is otherwise unlawful. Agencies should give priority to the regulations in conflict with the United States Supreme Court decisions listed earlier in this memorandum. The repeal of each unlawful regulation shall be accompanied by a brief statement of the reasons that the "good cause" exception applies.
- Within 30 days of the conclusion of the review period directed in Executive Order 14219 to identify unlawful and potentially unlawful regulations, agencies shall submit to the Office of Information and Regulatory Affairs a one-page summary of each regulation that was initially identified as falling within one of the categories specified in section 2(a) of that Executive Order, but which has not been targeted for repeal, explaining the basis for the decision not to repeal that regulation."
The Implementation of the Loper Decision
The Presidential Memo requires federal agencies, like NCUA and the CFPB, to unilaterally repeal facially unlawful regulations from the Loper's looking glass. In other words:
"In effectuating repeals of facially unlawful regulations, agency heads shall finalize rules without notice and comment, where doing so is consistent with the "good cause" exception in the Administrative Procedure Act. That exception allows agencies to dispense with notice-and-comment rulemaking when that process would be "impracticable, unnecessary, or contrary to the public interest." Retaining and enforcing facially unlawful regulations is clearly contrary to the public interest. Furthermore, notice-and-comment proceedings are "unnecessary" where repeal is required as a matter of law to ensure consistency with a ruling of the United States Supreme Court. Agencies thus have ample cause and the legal authority immediately repeal unlawful regulations." Emphasis added.
Potential Future Impact on Credit Unions
Due to the reversal of Chevron and the interpretive power shift, federal regulators, like NCUA and CFPB, will likely take more time on their rulemakings implementing related statutes and be more cautious in their interpretations, leading to potentially more pointed and narrower regulations.
Credit Unions should anticipate slower rulemakings and continue to communicate their advocacy needs to America's Credit Unions as we brace for the changing regulatory compliance landscape.
If you have any questions concerning this blog, please contact our Compliance Team compliance@americascreditunions.org.
