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Judicial Deference to Agency's Interpretation of TILA Reaches New High Water Mark


On January 25, 2011, the U.S. Supreme Court in Chase Bank USA, NA  v. McCoy, 562 U. S. ____ (2011) (link), unanimously decided that an agency interpretation of an ambiguous provision in Regulation Z, promulgated under the federal Truth in Lending Act (TILA), was due nearly absolute deference. The details of McCoy may not be of interest to a general audience; not only did the decision address a provision of Regulation Z that applies only to credit card issuers, but that provision has since been amended. However, with the Dodd–Frank Wall Street Reform and Consumer Protection Act transferring interpretative authority over the federal consumer protection laws to the new Bureau of Consumer Financial Protection (CFPB), McCoy is a reminder of the stakes involved in the organization and direction of the CFPB.

Interpretation of TILA traditionally has been thought of as requiring consultation with four sources:  the statute itself, Regulation Z, Official Staff Commentary issued by the Federal Reserve, and case law. Ambiguities in the law typically were worked out within the context of these sources. However, in McCoy, the United States Supreme Court confronted a situation where none of the statute, regulation or official commentary provided an unambiguous answer to the issue presented. Rather than resolving the ambiguity by a process of interpretation, the Supreme Court instead simply chose to follow the agency’s interpretation stated in an amicus brief from the Federal Reserve, as the interpretation was not “plainly erroneous or inconsistent with the regulation.” In essence, the Supreme Court delegated to an agency the question presented by the appeal. The parties thought they were appealing to the U.S. Supreme Court – but in substance were appealing to the Federal Reserve. McCoy may mark a new high-water mark in judicial deference to agency interpretations of TILA.

When authority over TILA interpretation transfers to the new CFPB, presumably this judicial deference to the agency interpretation will follow. For this and other reasons, there should be no wonder why the struggle over the creation of, and the new leadership for, and the role of Congressional oversite over, the CFPB was and is such a hot topic in Washington.

Troutman Sanders will be watching closely, and reporting regularly on, the process and progress of the formation of the CFPB.