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Supreme Court to Consider Regulators' Powers
Thursday, October 16, 2014 6:35 AM

On December 1 of this year, the U.S. Supreme Court is expected to consider a case known as Perez v. Mortgage Bankers Association, which pits the MBA against the Department of Labor (Secretary of Labor Thomas Perez) about whether loan officers should be paid overtime. The decision in this case could have widespread implications for government regulations and the organizations that follow them.

According to the Supreme Court, the question presented for the high court's review is "whether a federal agency must engage in notice-and-comment rulemaking before it can significantly alter an interpretive rule that articulates an interpretation of an agency regulation."

In 2006, the Department of Labor issued an opinion letter that said mortgage loan officers' duty qualifies for an exception to the overtime rule in the Fair Labor Standards Act. In 2010, the department's deputy administrator reversed course, saying the officers did not qualify for the exception.

MBA sued the Department of Labor, saying its interpretation could not be changed without a notice and comment period required in the Administrative Procedures Act. The U.S. District Court of Appeals for the D.C. Circuit ruled that the 2010 decision must be reversed.

Credit Union National Association's general counsel Eric Richard said, "This case has the potential to make the regulatory process more transparent for regulated industries like credit unions, but we can expect the Justice Department to fight all the way."

"Guidance is used extensively by credit union regulators, including both the National Credit Union Administration and the Consumer Financial Protection Bureau, including sometimes when regulators could do a better job after public comment. This is an important issue CUNA will be watching during the current Supreme Court term."

If the Supreme Court upholds the D.C. Circuit Court's decision, agencies may decide not to use guidance as often for fear of locking themselves into a position, Richard said. If the Supreme Court rejects that decision, agencies are more likely to issue more interpretations.