Chevron, Loper, and the Administrative State

David Silberman is currently a professional dilettante serving as a Lecturer in Law at Yale Law School, a Senior Fellow at the Center for Responsible Lending, a Senior Advisor for the Financial Health Network, and an informal advisor to other non-profits and start-ups. From 2011-2020, he served as the Associated Director for Research, Markets, and Regulations at the CFPB. Before joining the CFPB, David worked for the better part of twenty years in and around financial services, first for the AFL-CIO and then for Kessler Financial Services.

In the four months since the Supreme Court decided Loper Bright Enterprises, much ink has been spilled over the implications of Loper for the administrative state generally and the work of the CFPB in particular. Some banking lawyers have argued that the demise of Chevron marks a “sea change“ in the relationship between administrative agencies and courts, one that “is particularly impactful with respect to the CFPB” and that “casts a new cloud over the CFPB's future endeavors.” Professor Adam Levitin has suggested that Loper – coupled with a second Supreme Court decision taking an expansive view of when regulations are subject to challenge – represents “a major rollback of the administrative state” and that its effect will be to “supercharge regulation by enforcement in the financial regulatory space.”

In my view, there is less to Loper than meets the eye, especially when it comes to the recent work of the CFPB. That is in part because of how the CFPB has been going about rulemaking and in part because of how judges have been going about judging. The net of it is that I find it difficult to see how Chevron’s death will make the CFPB’s defense of its rules from judicial review appreciably more difficult than was already the case in practice.  

If anything, by reclaiming judicial authority to resolve issues of statutory interpretation, Loper could ease the challenge the CFPB would otherwise have faced in defending rules that rest on its exercise of various forms of Congressionally-delegated quasi-legislative authority. Whether that proves to be the case will depend on whether the Supreme Court accepts the legitimacy of such delegations—which is where the battle over the future of the administrative state will be won or lost. 

Chevron On Paper and In Practice

On its face, Chevron provided for highly circumscribed judicial review, essentially requiring deference to agency decisions unless “Congress has addressed the precise question at issue.” Paradoxically, however, after Chevron was decided, the Court concluded that it did not apply to “interpretive rules” —a vehicle authorized by the Administrative Procedure Act (APA) for agencies to articulate statutory interpretations — but only to “legislative rules” issued after notice and comment.^[1] That means that Chevron simply wasn’t relevant to much of the CFPB’s work over the past several years, as the Bureau has largely announced its statutory interpretations through interpretive rules— sometimes styled as “advisory opinions” — including the recent Buy Now, Pay Later and proposed Earned Wage Access rules. Indeed, the CFPB has issued 13 interpretive rules and 15 “circulars” – which is a vehicle the Bureau has created for the stated purpose of guiding other agencies as to “how the CFPB intends to enforce federal consumer financial law” – over the past three years compared to six legislative rules.^[2] Further, Chevron has never applied to agency interpretations articulated in the context of enforcement actions which is another vehicle the Bureau has used, albeit to a lesser extent than many have suggested, in an effort to shape the direction of the law. In sum, most of the CFPB’s recent regulatory interpretations were through processes to which Chevron – and hence its demise – are irrelevant.

But even in the realm within which Chevron applied, it is unclear at best how much of a constraint it imposed in practice on judicial review. As Loper itself acknowledges, the Supreme Court had “for decades …often declined to invoke Chevron even in those cases where it might appear to be applicable” and had not relied on Chevron even once since 2016. It is equally difficult to find evidence of Chevron making much of a difference in the lower courts recently, especially in Texas district courts and in the Fifth Circuit, where challenges to CFPB (and other agency) rules tend to be filed.^[3] I thus am deeply skeptical that the demise of Chevron will make a material difference in how the CFPB approaches its work or in how its rules fare in court. To make the point more concretely, how likely is it that the courts reviewing the challenges to the CFPB’s credit card late fee rule, its 1071 Rule,  or its 1033 rule — all legislative rules to which Chevron in theory applied – would have felt constrained to uphold those rules under Chevron but not under Loper?^[4]

The Multiple Roles of Rulemaking

To assess what Loper portends for the future of CFPB rulemaking — and rulemaking more generally —it is useful to consider the various roles that agencies like the CFPB play in implementing federal laws. Since I left the CFPB in 2020, I have had the opportunity to teach a course in consumer finance law which has caused me to reflect on the rules the Bureau promulgated during my tenure, as well as some of the rules the Bureau inherited from the Federal Reserve Board and the rules it issued since my departure. 

Some of those rules did, of course, turn on interpretations of ambiguous statutory language. Nowhere was that truer for us than when we had to answer what the Dodd-Frank Act meant when it said that lenders and investors “may presume” that qualified mortgages were originated in conformity with the Act’s ability-to-repay requirements. Did “presume” mean conclusively presume — thereby creating a safe harbor— or was the presumption of compliance rebuttable? (Unhelpfully, Congress entitled the section in question, “Safe Harbor and Rebuttable Presumption.)^[5]

But much of the work the Bureau did and continues to do is of a quite different sort. Indeed, I’ve come to see rulemaking as involving at least four functions beyond statutory interpretation, each of which involves exercises of more-or-less explicitly delegated authority. 

• First, as part of its authority — or mandate — to issue regulations to “carry out the purposes” of a statute, the CFPB (and the Federal Reserve Board before it) can fill in missing details of a statutory mandate so that those subject to it know specifically what is expected of them. Take, for example, the CARD Act’s requirement that credit card issuers consider an applicant’s “ability to pay the required payments” before issuing a credit card or increasing a credit line.^[6] That 50-word provision left a myriad of questions unanswered. The Board’s implementing regulation provided answers to such issues as whether issuers are required to verify a consumer’s income or can rely on stated income and how to calculate “required payments” given that they vary from month to month based on the consumer’s balance.^[7]

• Second, the CFPB can use its authority to issue implementing regulations to particularize broad statutory prohibitions, making their application clear to specific practices. For example, the Fair Credit Reporting Act requires consumer reporting agencies, in producing consumer reports, to “follow reasonable procedures to assure maximum possible accuracy.”^[8] Those words are not so much ambiguous as they are indeterminate, and rulemaking can identify specific practices required to meet this obligation or practices that fall short of doing so. The same is true, to take another example, with respect to the Dodd-Frank Act’s prohibition on acts or practices that take “unreasonable advantage” of specified consumer vulnerabilities.^[9]

• Third, most consumer financial protection laws authorize the CFPB to make such “adjustments and exceptions” as the Bureau concludes are “necessary or proper” to “effectuate the purposes” of a particular statute, “prevent circumvention or evasion” of the law, or “facilitate compliance” with it.^[10] Some also authorize the Bureau to create exemptions for classes of transactions or providers if, for example, the Bureau concludes that coverage of such transactions will not provide “meaningful consumer benefit.”^[11] As I look back, I think much of our work to implement the various substantive provisions of the Dodd-Frank Act  was of this very nature and made the statutory provisions more workable than they otherwise would have been.

• Fourth and finally, not infrequently Congress has directed or authorized the CFPB to resolve quasi-legislative questions expressly left unanswered by Congress. Again, perhaps the clearest example from my experience is the qualified mortgage provision of the Dodd-Frank Act. There, one of the statutory criteria defining a QM is whether the mortgage “complies with any guidelines or regulations” issued by the CFPB as “measures of ability to pay.”^[12] Congress further authorized the Bureau to “revise, add to, or subtract from” the other QM criteria as necessary “to ensure that responsible, affordable mortgage credit remains available to consumers.”^[13] It was those authorities that enabled the CFPB to adopt the “patch” — extending QM status to all mortgages eligible for purchase or guarantee by Fannie Mae or Freddie MAC – and, when the patch expired, to replace it with a rule extending QM status to loans priced at or below a certain threshold. 

Loper and the Great Unknown

Under Chevron, the distinctions between these various rulemaking functions arguably was of no consequence.  Chevron, on its face, applied equally to cases where a statute was “silent” and cases where it was “ambiguous” — to instances in which an agency was, in Chevron’s words, “filling gaps” as well as to instances in which it was engaged in statutory interpretation.

Loper, in contrast, distinguishes sharply between different types of agency decisions. It squarely holds that “courts decide legal questions by applying their own judgment” — that it is “’the responsibility of the court to decide whether the law means what the agency says.’” But at the same time, Loper acknowledges that “subject to constitutional limits,” Congress may — and often has— “confer[red] discretionary authority on agencies” and that in such cases, the courts are to “stay out of discretionary policymaking left to the political branches” and, instead, “recogniz[e] connotational delegations” while “ensuring the agency has engaged in ‘reasoned decisionmaking’ within those boundaries.” Put differently, although the APA, in Loper’s view, “prescribes no deferential standard for courts to employ in answering…legal questions,” the Act “does mandate that judicial review of agency policymaking and factfinding be deferential.” (Emphasis in original).

To be sure, the significance of these passages are far from certain. Loper does not resolve “when the best reading of a statute is that it delegates discretionary authority,” although the examples Loper offers—including statutes that impose a duty under certain conditions “as defined by regulation” and statutes that authorize regulation subject to “limits imposed by a term…such as ‘appropriate’ or ‘reasonable’” — are suggestive and would seem to encompass each type of delegated authority discussed above. 

More importantly, the reference to the “constitutional limits” on delegations and “constitutional delegations” — phrases that appear four times in the decision – is a flashing yellow light, raising the question as to what limits the current Court majority believes the constitution places on delegations. Opponents of the administrative state have long placed a bullseye around what is called the “nondelegation doctrine” and the principles the Court has followed since 1935. Loper is a sideshow to that debate, and how it is resolved will be the true determinant of the future of the administrative state.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1] United States v. Mead Corp., 533 U. S. 218, 230 (2001) 

^[2] These interpretive rules are typically styled as “advisory opinions” which, under the Bureau’s Advisory Opinions Policy are “interpretive rules under the Administrative Procedure Act (APA) that respond to a specific need for clarity on a statutory or regulatory interpretive question.” 85 FR 77987 (Dec. 30,2020). The Bureau classifies circulars as “general statements of policy” which are not binding on either the Bureau or private parties. 87 FR 35868 (June 24, 2022). The Burau maintains a compilation of its Advisory Opinions  and Circulars it has issued on its website.   

^[3] In fairness, the CFPB has not fared much better in defending its rules in the district courts in the District of Columbia. District courts overturned portions of the CFPB’s HMDA and prepaid rules in, respectively, Nat’l Community Reinvestment Coalition., et al. v. CFPB, No. 20–cv–2074, 2022 WL 4447293 (D.D.C. Sept. 23, 2022) and PayPal Inc. v. CFPB, No. 19-cv-3700, 2024 WL 1344791 (March 29, 2024). The CFPB has appealed the latter ruling.

^[4] The district court reviewing the late fee rule expressed serious misgivings about the rule before Loper was decided. Chamber of Commerce v. CFPB, No. 4:24-cv-00213 (May 10,2024) while the district court reviewing the 1071 rule upheld it post-Loper, Texas Bankers Ass’n v. CFPB, 7:23-CV-144 (S.D. Tex. Aug. 26, 2024). 

^[5] 15 U.S.C. §129C(b)(1). 

^[6] 15 U.S.C. § 1695e. 

^[7] 75 Fed. Reg. 7658,7818, 7900 (Feb. 22, 2010)

^[8] 15 U.S.C. §  1681e(b).

^[9] Dodd-Frank Act § 1031(d)(2), 12 U.SC. § 5531(d)(2).

^[10] Such language is found, for example, in § 105(a) oi the Truth in Lending Act (TILA), § 703(a) of the Equal Credit Opportunity Act (ECOA), and § 904(c of the Electronic Fund Transfer Act. And § 1022(b)(3) of the Consumer Financial Protection Act.

^[11] Exemption authority is provided by § 105(f) of TILA, § 703(b) of ECOA

^[12] 15 U.S.C. § 129C(b)(2)(vi).

^[13] 15 U.S.C. § 129C(b)(3)(B)(i).

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