A ruling by the U.S. Court of Appeals for the Second Circuit has sided with the Office of the Comptroller of the Currency (OCC) on the issue of preemption of state law. The July 11 decision was in favor of Wachovia Bank and Wachovia Mortgage Corp. over the Connecticut banking commissioner (Wachovia Bank N.A. v. Burke, 2nd Cir., No. 04-3770, 7/11/05). By ruling for Wachovia, the appeals court backed up the U.S. District Court for the District of Connecticut, which had held that the National Bank Act and OCC regulations preempt certain state banking laws in regard both to the actions of the bank itself and its operating subsidiaries.

“We agree that federal law preempts state regulation of a national bank operating subsidiary to the same extent that it preempts regulation of the parent national bank,” Judge Chester Straub wrote for the court. The Second Circuit’s ruling supported the OCC’s position on preemption, which it sought to clarify through two rulemakings in 2004 that declared the agency had the sole authority to regulate national banks on certain consumer protection matters.

August 9, 2005