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What the End of ‘Chevron Deference’ Could Mean for Banks

Authored By: Lewis Wood on 6/13/2022

Source: American Banker

The culmination of a yearslong push from conservative lawyers to undercut the broadest powers of federal agencies could unsettle decades of American banking law and fundamentally reshape the industry’s relationship to its regulators, scholars say.

Much of American administrative law has rested upon a legal principle known as “Chevron deference,” a doctrine borne of a 1984 U.S. Supreme Court case that granted federal agencies a wide berth in interpreting ambiguous congressional statutes. But Chevron deference has come under significant scrutiny in the decades since, and several conservative justices on the Supreme Court today have expressed skepticism for the doctrine

“Now that the Supreme Court is mostly conservative, what you often see as they’re reviewing agency regulations — rather than citing [Chevron] as a fundamental building block of judicial review over administrative decision making — they won’t even cite the case,” said David Zaring, a professor of legal studies and business ethics at the Wharton School of the University of Pennsylvania.

“If Chevron deference goes away, you could see a lot of agency initiatives being scotched by the courts, because they're not supported by a clear congressional authorization to do those things,” Zaring said. 

Chevron’s influence over nearly four decades is undisputed — it is perhaps the most cited case in administrative law — but its wider legacy remains contested by scholars. 

The 1984 ruling in Chevron USA, Inc. v. Natural Resources Defense Council introduced a test for lower courts to apply when considering a challenge to federal regulations. The court deciding Chevron found that if the text of the statute is ambiguous but the agency’s interpretation of the law is reasonable, “a court may not substitute its own construction of a statutory provision,”  according to the text of the ruling. 

The effect of the Chevron case is that it is very difficult for plaintiffs to overturn a reasonable and duly promulgated regulation. By granting federal regulators such a wide and malleable standard for establishing their own authority, some say that the doctrine has made it easier for Congress to remain dysfunctional and pass few landmark laws, despite years of a rapidly evolving technological, business and political landscape. 

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