Friday Nights are for - reading the SCOTUS and Chevron decision right?
Here is my first take on this huge decision & how it might impact NCUA and credit unions.
This decision will most likely have a substantial impact on a regulations and also Letters to Credit Unions (LCUs). Here's how:
• Reduced Deference: NCUA LCUs often interpret statutes or regs, which will no longer receive automatic deference. This could weaken the practical force of such guidance.
• Increased Vulnerability to Challenge: Without deference, LCUs guidance will be vulnerable to appeal & legal challenges. Courts will apply their judgment in interpreting statutes, potentially disagreeing with interpretations more frequently.
• Heightened Scrutiny: NCUA may need to provide more robust justifications for their interpretations in guidance documents, knowing that courts will scrutinize them more closely. NCUA may find the need to submit guidance to the comment process.
• Potential Decrease in Guidance: NCUA might become more cautious about issuing guidance documents, particularly on contentious or ambiguous statutory provisions, due to the increased risk of judicial override. Note that a material amount of NCUA guidance is VERY dated. This is because staff avoids bringing it forward to the Board because of the risk the update makes the guidance less effective due to board influence. Ironically Chevron does the same – it takes the power from staff and agencies and puts it with politically appointed judges.
• Shift in Focus: NCUA may put more emphasis on formal rulemaking.
• Retroactive Impact: While the Court stated that past judicial decisions relying on Chevron are not automatically invalidated, guidance and legal interpretations that has not been subject to judicial review may be more vulnerable to new challenges. For example, think of a federal community charter that gets approved in 2025 – will the ABA sue? You bet and they might win - so that tightens up FOM and reduces the value of the federal charter.
• Potential Legislative Response: Congress might respond by being more explicit in delegating interpretive authority to agencies in future legislation, or by clarifying existing statutes. This to me might be the best case, in some situations, but it is a double-edged sword – as writing a law with the intent of being explicit is different than actually achieving that end.
• How About Safety and Soundness? I am still giving this a lot of thought. I think credit unions that want to appeal will have a better chance of winning if they attack safety and soundness. Why? Because it is very discretionary. But don’t celebrate to quickly appeals are a heavy lift and to really get traction it would have to go beyond the walls of an NCUA appeal to the courts. Meanwhile you still need to comply with the exam while the appeal and/or court challenge is going on. Said another way – you will likely decide to go along to get along.
More to come.
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