Since its creation in 2011, the Consumer Financial Protection Bureau (“CFPB”) has exercised its broad authority to regulate a wide swath of the consumer financial services industry. [1] While the CFPB has the authority to engage in formal notice-and-comment rulemaking and adjudicatory proceedings, the CFPB more frequently makes its positions known to the public through consent decrees, amicus briefs, and unofficial guidance, among other avenues. These informal positions—often relied upon by private litigants in civil actions—raise a host of questions about how much deference they are owed by the courts.  Indeed, the question of how much deference, if any, a court should afford a CFPB position often becomes a point of contention and debate.

To date, the deference courts have provided to CFPB positions has been mixed. [2] Courts have been willing to defer to the CFPB when it has offered empirical and other data to support its consumer-oriented interpretations. However, courts have not afforded deference to interpretations of statutes that are unambiguous, regulations that simply re-state the text of the statute, or interpretations contained in amicus briefs or consent decrees.  Under Chevron, [3] courts are not required to defer to agency interpretations if the underlying statute is unambiguous and requires no agency interpretation. The CFPB has recently advocated for Chevron deference by asserting that clear statutory text is nonetheless ambiguous, while at the same time pushing interpretations that diverge from those issued by predecessor agencies, such as the U.S. Department of Housing and Urban Development (“HUD”). Whether the CFPB is successful in its efforts to obtain Chevron deference in re-interpreting existing statutes could have a wide-ranging and substantial impact on the financial services industry.

The deference spectrum:
The concept of judicial deference to agency interpretations is best viewed as a continuum with total deference at one end and none at the other. [4] The amount of deference a court may give an agency position generally is guided by several Supreme Court benchmarks briefly summarized below: [5]

• Chevron deference is the most deferential standard, applicable to an agency’s interpretation of a statute administered by that agency where the statute is silent or ambiguous regarding the issue in question. [6] Chevron deference only applies if Congress delegated authority to the agency to make rules carrying the force of law, and the interpretation is made pursuant to that authority—e.g., by engaging in notice-and-comment rulemaking or by formal adjudication. [7] If Congress has expressly delegated authority and Chevron deference otherwise applies, an agency interpretation is considered controlling and binding in judicial proceedings “unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute.” [8] If Congress has implicitly delegated authority to the agency, courts are “obliged to accept the agency’s position if Congress has not previously spoken to the point at issue and the agency’s interpretation is reasonable.” [9] Accordingly, when Chevron applies,courts will typically defer to an agency’s formal interpretation of an ambiguous statute, even if it is not the best or most persuasive reading of the statute. [10]
• Auer [11] deference is similar to Chevron deference, but applies wherean agency is interpreting its own regulation rather than a statute. [12] Auer deference would be accorded to CFPB pronouncements only when the regulation at issue is ambiguous and the interpretation reflects the agency’s “fair and considered judgment on the matter in question” and is not “plainly erroneous or inconsistent with the regulation” or simply a “‘post hoc rationalizatio[n]’ advanced by an agency seeking to defend past agency action against attack.” [13]
• Skidmore [14] deference addresses how much weight to give to an agency interpretation that is not a formal adjudication, a notice-and-comment rulemaking, or an interpretation of the agency’s own regulation.  It is less formulaic than either Chevron or Auer deference. Skidmore deference is typically considered in connection with “opinion letters…[,] policy statements, agency manuals, and enforcement guidelines” and other interpretations that “lack the force of law.” [15] These types of interpretations are “‘entitled to respect’… only to the extent that those interpretations have the ‘power to persuade.’” [16] The level of Skidmore deference given to an agency interpretation is assessed by looking at numerous factors enumerated by the Supreme Court, including “the thoroughness evident in its consideration, the validity of its reasoning, [and] its consistency with earlier and later pronouncements.” [17]

Notes:
[1] For summaries of the CFPB’s actions during its first years of operation, see the following articles prepared by K&L Gates attorneys:  http://www.klgates.com/files/Publication/1777bade-f301-4e33-8242-941cbdf5a67d/Presentation/PublicationAttachment/9b26f04c-ebd6-4930-9032-9868a4297e38/CFPB_Enforcement_Actions_03012015.pdf and http://www.consumerfinancialserviceswatch.com/2015/07/happy-birthday-cfpb/.

[2] Most of the reported judicial decisions that discuss the deference to be given to a CFPB interpretation are in the context of private, civil litigation matters.

[3] Chevron USA, Inc. v. Nat’l Res. Def. Council, 467 U.S. 837 (1984).

[4] As some commentators have noted, the determination of whether deference applies is not purely objective and will be governed to a certain extent by the court’s ultimate opinion regarding the dispute. See, e.g., Michael Herz, Chevron Is Dead; Long Live Chevron, 115 Colum. L. Rev. 1867, 1878 (2015) (“Like most people, judges will protect their turf. Moreover, even after all these years, strong readings of Chevron remain counterintuitive; judges’ learned intuitions do not generally lead them to defer on questions of law.... The point is only that, as with justiciability doctrines, the nature and structure of the judiciary guard against overdoing deference, and the danger will almost always be that courts go too far in the other direction.”).

[5] The jurisprudence regarding deference to administrative interpretations is complex, expansive, and fills many treatises and textbooks; the summaries of the various deference standards set forth in this article are not intended to be comprehensive or exhaustive but rather simply to provide background for a discussion of the deference afforded various CFPB interpretations.

[6] Chevron USA, Inc., 467 U.S. at 842-43; see also United States v. Mead Corp., 533 U.S. 218, 226-27 (2001).

[7] Mead Corp., 533 U.S. at 226-27 (holding that an “administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority”); id. at 230-31.

[8] Id. at 227 (citing Chevron USA, Inc., 467 U.S. at 844).

[9] Id. at 229 (citing Chevron USA, Inc., 467 U.S. at 842-45).

[10] Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005) (“If a statute is ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires a federal court to accept the agency’s construction of the statute, even if the agency’s reading differs from what the court believes is the best statutory interpretation.”).

[11] Auer v. Robbins, 519 U.S. 452 (1997).

[12] Id. at 461.

[13] Id. at 461-62 (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988)). 

[14] Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[15] Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000) (refusing to apply Chevron deference to “an interpretation contained in an opinion letter” from the Department of Labor).

[16] Id. (quoting Skidmore, 323 U.S. at 140).

[17] Mead Corp., 533 U.S. at 228 (quoting Skidmore, 323 U.S. at 140).