Significantly insignificant: The United States Supreme Court decides agencies decide what agencies can decide

John Lande Iowa Banking Law Dickinson Law Firm Des Moines, Iowa

Posted on 05/22/2013 at 11:31 AM by John Lande

On Monday, the Supreme Court issued its decision in Arlington v. FCC. This blog previously discussed the importance of this case for banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act left federal regulators such as the OCC, FDIC, Federal Reserve, and CFPB with broad new authority to write and implement new rules governing financial institutions. In light of the deference courts afford agency interpretations of their own rules, previously discussed in this blog, once an agency makes a decision it is very difficult to find redress in court. Arlington v. FCC thus represents an important test of how far courts are willing to extend deference to agencies. This case raised the question of whether courts should defer to agency decisions about how far the agency's authority extends to regulate particular matters. This has obvious implications for federal financial regulators since Dodd-Frank gave regulators substantial new authority. Arlington v. FCC arose because federal law requires that local governments approve applications to place new wireless transmission towers. The statute's only command to local governments is that they consider applications 'in a reasonable period of time.' In practice, local governments would often impose lengthy delays on consideration of the applications for new wireless antennas. The FCC claimed that it had the authority to set definite time periods for local governments to process applications to place new wireless antennas. The statute at issue made no mention of whether the FCC could or could not impose definite time lines. The FCC decided that it had the authority to impose specific time lines for consideration of applications, and therefore imposed deadlines of 90 and 150 days for local governments to consider applications. In an opinion written by Justice Scalia, the Court sided with the FCC and reaffirmed the longstanding rule that courts defer to agencies. The question, according to Justice Scalia, for courts is simple: does the text of the statute enacted by Congress prohibit the agency from taking a particular action? Sometimes, statutes are very clear about what an agency can and cannot do. In those cases, courts will have no trouble deciding whether the agency acted properly. In many cases, such as in Arlington v. FCC, statutes are ambiguous and therefore it is up to the agency to decide whether Congress intended for the agency to take certain action. By giving the FCC jurisdiction to implement the statute at issue, did Congress intend for the FCC to impose specific deadlines for consideration of applications? Who gets to decide the meaning of a 'reasonable period of time'? What authority does the FCC have to decide that 90 days is reasonable, but 91 days is not? Under the Supreme Court's decision, all of these questions may be answered by the agency and those answers will be set aside only if a court determines that they are not a reasonable interpretation of the statute. Since the FCC's time lines for consideration were reasonable in the Supreme Court's view, there was no reason for the Court to set aside the FCC's action. Thus, Arlington v. FCC is a significant decision because it answers a question that has lingered in the courts do agencies decide what they can decide? However, it is insignificant because it does little to change the reality that courts will avoid intervening in agency decisionmaking if at all possible. The OCC, FDIC, Federal Reserve, and CFPB will all continue to benefit from cursory judicial scrutiny of their decisions regarding the meaning, effect, and limits of statutes. This is particularly important in light of momentous legislation like Dodd-Frank and the Affordable Care Act. In order for both bills to pass Congress and garner the President's signature, the mandates in the legislation were intentionally vague. Dodd-Frank, for example, commands the CFPB to 'prevent . . . unfair, deceptive, or abusive act[s].' Does this mean that the CFPB can outright ban certain products? Is it a deceptive practice to charge an overdraft fee without first giving the customer notice that you are about to do so? What if the customer already agreed to overdraft protection? What if the customer overdrafts four times in a week, are the fees now abusive? Could the CFPB even argue that it can require increased capital for banks since doing so would reduce the risk that a bank might engage in risky financial transactions with consumers? With congressional gridlock a constant feature of divided government, bills that do pass Congress will rarely provide specific guidance to agencies. The real legislators are now the regulators who are given extensive authority to write rules to implement vague congressional mandates. Those rules are then nearly immune from judicial oversight. Three justices in Arlington v. FCC recognize that agencies are subject to virtually no oversight. These three filed a dissent from the majority opinion, and have signaled they may be ready to stop giving agencies so much latitude in which to operate. For now, however, financial institutions would be well served to pay close attention to notices of proposed rulemaking from the OCC, CFPB, Federal Reserve, and FDIC. This is where the real law is written, and may be the only time that banks truly have an opportunity to stop agency overreach.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande

Categories: John Lande, Banking Law


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