Preemption Debate Continues - Now In The Supreme Court
On June 19, 2006, the Supreme Court agreed to decide whether states can apply their lending rules to national banks that are currently regulated by the U.S. Comptroller of the Currency, and operating subsidiaries of those national banks. A "yes" answer could open national banks and their operating subsidiaries, as well as other federally chartered institutions, to a host of new state-specific rules and oversight procedures.
In Wachovia Bank v. Watters, the Sixth Circuit had held that rules promulgated by the state of Michigan that require lenders to register, pay a fee, submit an annual financial statement and make documents available for inspection, were preempted by the National Bank Act and OCC regulations. This decision is consistent with the long-standing position of the OCC and the Office of Thrift Supervision that nationally-chartered banks and federally-chartered thrifts are subject to the exclusive jurisdiction of and supervision by those federal agencies.
The Bush administration had urged the Supreme Court to deny review, but 42 states and the District of Columbia filed briefs urging the Court to hear the issue, arguing that state regulations are necessary to protect consumers from deceptive lending practices.
Stay tuned.