The National Law Forum

The Conference of State Bank Supervisors (CSBS) recently announced that seven states, Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington, have agreed to a multi-state compact (the Compact) that will standardize certain aspects of the licensing process for money services businesses (MSBs).

Under the Compact, if one of the participating states reviews “key elements of state licensing for a money transmitter” as part of that state’s initial licensing process, the other participating states agree to accept the findings of the review.  The CSBS identifies the key elements as IT, cybersecurity, business plan, background check, and compliance with federal Bank Secrecy Act requirements.  With the announcement of the Compact, the CSBS took a notable step toward accomplishing one of the six objectives provisioned under its “Vision 2020” initiative — harmonizing multistate supervision.  Its other objectives include: creating a FinTech advisory panel; redesigning the Nationwide Multistate Licensing System; assisting state banking regulators; enabling banks to service non-banks; and improving third-party supervision.

The Compact will begin as a pilot program in early April 2018, and MSBs that are interested in licensure through the program may contact the Washington State Department of Financial Institutions.  According to the CSBS, additional states are expected to join the Compact in the future.

Many industry participants will likely view the Compact as a welcome attempt at streamlined licensing and coordinated regulatory supervision at the state level, while they continue awaiting a decision from the Office of the Comptroller of the Currency (OCC) on possible issuance of a federal FinTech charter and the outcome of a pending lawsuit brought by the CSBS challenging the OCC’s authority to issue such a charter.  Others may view this effort as too little, too late.  Even with streamlined applications, licensed money transmitters will still have to obtain separate licenses, pay separate application fees, establish separate bonds, and comply with other separate, non-uniform state law requirements.  Nevertheless, it is good to see some states recognizing and trying to address the significant burdens of the current state money transmitter licensing framework.

On March 19, 2018, the US Supreme Court denied a petition for writ of certiorari in Garco Construction, Inc. v. Speer.  In doing so, the Court declined an opportunity to revisit an important and controversial administrative deference standard, known as Auer or Seminole Rock deference, which requires courts to give “controlling weight” to an agency’s interpretation of its own regulations.  The deference afforded to an agency’s interpretation of its own regulations is often a critical issue in environmental litigation.  The Court’s decision not to reconsider the deference standard at this time means that agencies will continue to have great latitude to construe their own regulations.

However, while the Court denied the petition, Justice Thomas issued a dissent, joined by Justice Gorsuch, criticizing the Auer and Seminole Rock deference standard.  Justice Thomas wrote that “this would have been an ideal case to reconsider Seminole Rock deference, as it illustrates the problems that the doctrine creates,” and he described the doctrine as “constitutionally suspect” and “on its last gasp.”

Justice Thomas’s dissent will likely add fuel to the growing calls to reconsider Auer and Seminole Rock.  Legal commentators (see here, here, and here) have increasingly criticized the fact that under Auer and Seminole Rock courts are required to defer to an agency’s current interpretation of its own regulations, even if the agency’s own view of the regulation has changed over time and the interpretation in question has never been subject to notice-and-comment or other regulatory procedures.  This deference to untested or evolving interpretations generates bad incentives, commentators argue.  By giving administrators a broad mandate to interpret their own regulations, agencies are incentivized to produce vague regulations, which increases regulatory uncertainty and surprise.  Moreover, such broad deference increases the ease with which agencies may change their interpretations according to political pressures and changes in administrations.

If the Supreme Court continues to pass on opportunities to overturn Auer and Seminole Rock, a legislative fix may be pursued.  As discussed on this blog previously, Congress recently considered legislation that would have amended the Administrative Procedure Act to require that courts decide “de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions and rules.”  Such legislation would overturn not just Auer and Seminole Rock, but also the related Chevron deference doctrine.  We will continue to monitor both judicial and legislative efforts to reconsider these important agency deference

The omnibus spending bill has been passed and signed by President Donald Trump in time to avoid a government shutdown. From an immigration perspective, here is what is “in” and what is “out” for the rest of the 2018 fiscal year.

In:

• $1.6 billion in funding for southern border fencing (but not the $25 billion requested by the President for “the wall”);
• Funding for 328 additional CBP officers;
• Sanctuary cities were not defunded, so funding is in;
• Reauthorization of EB-5 Regional Center Program, E-Verify, the Non-ministerial Special Immigration Religious Worker Program, and the Conrad State 30 J-1 Waiver for physicians; and
• H-2B visa relief
  • Secretary of DHS has the discretion to raise the number of visas available for the fiscal year to 129,547 (from 66,000)
  • Employers may use private wage surveys
  • The 10-month work season is still in
  • Flexibility for the seafood industry to stagger the entry of workers is still in

Out:

• DACA is not mentioned and is left in limbo;
• ICE must cut its detention beds; and
• The dairy industry lost the suspension of the “seasonal requirement” for H-2A visas.

At the last moment, Trump threatened to veto the bill because it did not include the wall funding and did not address the “dreamer” issue. During his signing announcement, the President expressed his unhappiness with the bill, but ultimately said he signed it as a matter of national security and to take care of the military.

Called on to speak about the bill, DHS Secretary Kirstjen Nielsen added that it was “unfortunate that Congress chose not to listen to the security on the front lines” about the wall. She also noted she will continue to work with Congress to “fund the department and give it the tools and resources it needs to execute the mission the American people have asked us to do.”