Court Ruling Takes the Teeth out of the CFPB?

Huge Supreme Court Ruling – Hope You Saw It

GUEST EDITORIAL

No, I’m not talking about the rulings on Trump or Fischer. While those are significant for our country, I’m referring to something that could be even more impactful, especially for small businesses and our industry.

I’m talking about Loper Bright Enterprises v. Raimondo and its potential implications. I mentioned to colleagues a few months back that this case could be a big deal for us when it was being argued.

Even though this case has nothing to do with repossession, as an industry stakeholder I got pretty excited when it was released.

I hope this sparks some conversations within our Associations so we can get expert opinions on what it all means. I’ll take a shot at explaining it from a layperson’s perspective to get the ball rolling.

The Supreme Court just scaled back much of the enforcement power of agencies like the CFPB by overturning the Chevron doctrine. Chevron essentially told courts to defer to an agency’s “expertise, opinion, and interpretation” when laws were ambiguous.

As long as an agency could tie a “Rule” to a vague statute, they could enforce it as if it were law. Courts only needed to find the agency’s argument “reasonable” if challenged, thanks to the deference Chevron granted.

Here’s how it worked in simpler terms:

An agency is created to enforce consumer protection laws. They study potential issues and make rulings to clarify or solidify the code. These rules are then used for enforcement actions against violators.

Some argued Chevron gave the Executive Branch too much power by forcing the Judicial Branch to defer to the Executive’s interpretation. This limited the courts’ ability to hold agencies accountable.

The Supreme Court overturned Chevron to restore balance between the Judicial and Executive Branches.

Now, agencies without clear statutory backing will face tougher challenges in court. The judiciary will rely more on Congress’s explicit will as expressed in legislation. When laws aren’t clear, courts are more likely to scrutinize agency actions to prevent potential overreach.

Let’s consider an example: property fees.

Many states (and possibly federal law) don’t clearly address how to handle a consumer’s property in a repossessed vehicle.

Under Chevron: If the CFPB created a rule saying it’s unfair to hold property for payment, lenders would comply to avoid fines. Challenging this in court was tough because judges had to defer to the CFPB.

Post-Chevron: If fined, lenders can still challenge in court, but now judges will focus more on the actual law and arguments related to the Skidmore doctrine (which isn’t as strong as Chevron).

This doesn’t mean agencies, or their rules disappear, but it does make challenging those hefty fines more appealing. Once courts rule, it sets precedent for future cases. Agencies might be more cautious, seek clearer laws, or reduce penalties to avoid costly and/or losing legal battles.

The implications are huge for our industry and country.

To keep the momentum in our favor, we need to:

Vote – The people you elect lead the Executive and Legislative Branches.
Lobby – Our DC lobbyists are more crucial than ever as legislators need to hear from us, not just the alphabet agencies.

As lower courts start applying the new precedent from the Supreme Court the overall implications will become clearer, but we should see some changes in how the CFPB operates as well as how industry stake holders react to their rulings.

In closing, these are just my thoughts as a non-lawyer. I’ve tried to fact-check my understanding, but my main goal is to spark conversation among our industry leaders.

Stay safe, and all the best!

Wes Carico

Artis Recovery