Recent Supreme Court Decisions Could Significantly Impact the Payments Industry

By: Jeremy McLaughlin, Greg Blase, Andrew Glass, and Josh Durham

The Supreme Court issued two decisions at the end of its term that will significantly alter how federal courts review challenges to federal regulations. The decisions could have a significant impact on the highly regulated payments industry.

In Corner Post v. Board of Governors of the Federal Reserve System, the Court clarified the time within which a party may bring suit against an agency for harm caused by final agency actions. The Administrative Procedure Act (APA) sets forth a 6-year statute of limitations for bringing such a suit. The Court held that the right of action under the APA “accrues”—that is, the limitations period starts to run—only when the plaintiff suffered the alleged harm rather than the date of the agency’s final action.

The Corner Post case is significant to the payments industry because it involves a challenge to Regulation II, implementing the Durbin Amendment and setting the maximum interchange fee permissible for debit cards. In disposing of Corner Post, the Court remanded the case so that the plaintiff may continue its challenge to the regulation. The plaintiff asserts that the rate set by Regulation II is higher than what was authorized under the statute.

In Loper Bright Enterprises v. Raimando, the Court overturned the 40-year-old Chevron doctrine. Chevron had directed federal courts to defer to federal agency interpretation of ambiguous statutory language in certain circumstances. Under Loper Bright’s new holding, a court reviewing an agency’s final action is directed to exercise “independent judgement” in deciding whether the agency acted within the statutory authority afforded by Congress. The Court also instructed that “when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it.” Although courts may give “careful attention to the judgment” of agencies, they no longer must defer to an agency’s legal conclusions about ambiguous language.

Taken together, Loper Bright and Corner Post afford greater opportunity to bring challenges to final agency action, including action by the CFPB, the Federal Reserve, and FinCEN. While the Court in Loper Bright noted that its ruling does “not call into question prior cases that relied on the Chevron framework,” that statement does not necessarily preclude timely challenges to final agency action that previously passed muster under Chevron, including challenges that are deemed timely under Corner Post. For instance, under the clarification of the APA limitations period in Corner Post, a court might determine that the Regulation II fee limitations are impermissible even though the final agency action setting the fee limitations occurred in 2011.

In sum, the highly regulated payments industry should pay close attention to the Loper Bright and Corner Post decisions and consult with legal counsel if they have questions about how they may impact their specific businesses.