On Compliance: What the Supreme Court’s ‘administrative state’ decision means for credit unions

NCUA’s approach to regulation protects it from the uncertainty many agencies now face following the Environmental Protection Agency ruling.

August 25, 2022 by Michael S. Edwards, CU Management

The U.S. Supreme Court’s recent administrative law decision in West Virginia v. Environmental Protection Agency may have sent shockwaves throughout the Washington, D.C. regulatory state; however, it is unlikely to disrupt policymaking at the National Credit Union Administration, and not just because NCUA headquarters is across the Potomac River in Alexandria, Virginia.

Unlike the Environmental Protection Agency, it would be out-of-character for NCUA to overstep its congressional authority by regulating on a “major question” without clear authority from Congress. For example, NCUA’s approach of seeking third-party vendor examination authority from Congress instead of reinterpreting existing Federal Credit Union Act provisions to create it by regulation, illustrates why NCUA is not EPA and also curiously involves the Y2K bug. (More on this later in this article.)

Details of the Recent EPA Decision

In West Virginia v. EPA, the Supreme Court nixed a 2015 EPA effort to reinterpret the Clean Air Act to regulate carbon dioxide. The EPA had tried to force power companies to shift away from coal-powered electricity generation toward more-favored natural gas and renewable energy using a type of “cap-and-trade” system. In a cap-and-trade system, regulatory credits are provided to less-polluting power plants, which operate below a specified pollution baseline. Those cleaner plants can sell their credits to plants that pollute above that baseline, allowing the dirtier plants to continue to operate, albeit at an increased cost that could prove prohibitively expensive based on market conditions.