WELLS FARGO BANK N.A.; Wells Fargo Home Mortgage v. Demetrios A. BOUTRIS; National City Bank of Indiana; National City Bank Mortgage Co. v. Demetrios A. Boutris
Nos. 03-16194, 03-16461, 03-16197
United States Court of Appeals, Ninth Circuit
August 12, 2005
419 F.3d 949
Before: REINHARDT, PAEZ, and BERZON, Circuit Judges.
Argued and Submitted Nov. 4, 2004.
IV
The Steads further argue that the levy upon and debit of the funds in their First Interstate Bank account was a taking without just compensation that violated the Fifth Amendment. We reject this argument. The government did not appropriate the funds on deposit at First Interstate Bank for its own use and did not take actual possession of or exert dominion and control over the funds. Cf. Pittman, 449 F.2d at 626. The debit of the funds from the Steads’ bank account also was not an unconstitutional taking by the government. It was the bank—not the IRS—that debited the Steads’ account, and the twenty-one-day holding provision of
V
Both parties are to a degree at fault in this unfortunate situation. For their part, the Steads failed timely to pay their full income tax liability for tax year 1994, did not respond to the notice of balance due or to the notice of intent to levy, and further did not follow up with First Interstate Bank and Wells Fargo Bank to ensure that the funds subject to the tax levy were remitted to the IRS. See United States v. Triangle Oil, 277 F.3d 1251, 1256-60 (10th Cir.2002) (holding that a taxpayer has standing to bring state law claims related to property levied upon by the IRS); see also
AFFIRMED.
William L. Stern, Severson & Werson, San Francisco, California, and E. Edward Bruce, Stuart C. Stock, Robert A. Long, Jr., and Keith A. Noreika, Covington & Burling, Washington, D.C., for the plaintiffs-appellees/cross-appellants.
Julie L. Williams, Acting Comptroller, Daniel P. Stipano, Acting Chief Counsel, L. Robert Griffin, Deputy Chief Counsel, and Horace G. Sneed, Director of Litigation, U.S. Department of the Treasury, Office of the Comptroller of the Currency, Washington, D.C., for amicus curiae Office of the Comptroller of the Currency.
Edward P. Sangster and Dylan B. Carp, Kirkpatrick & Lockhart LLP, San Francisco, California, for amicus curiae Quicken Loans Inc.
In these cross-appeals concerning California‘s regulation of residential mortgage lenders, we dеcide two issues: First, does the National Bank Act (“Bank Act“),
The district court answered both questions in the affirmative. Wells Fargo Bank, N.A. v. Boutris, 265 F.Supp.2d 1162 (E.D.Cal.2003) (Wells Fargo II).1 For the reasons that follow, we affirm the district court‘s conclusion as to preemption under the Bank Act but hold that the per diem loan-interest statute is not preempted by the DIDMCA.
I. Background
These appeals arise out of California‘s attempts to require Wells Fargo Home Mortgage Inc. (WFHMI) and National City Mortgage Co. (NCMC), wholly owned subsidiaries of Wells Fargo National Bank and National City Bank of Indiana, respec-
To that end, the Commissioner routinely conducts regulatory examinations of licensees’ records. The facts giving rise to this suit began after one such examination, when the Commissioner demanded that WFHMI conduct an audit of its residential mortgage loans made in California during 2001 and 2002. The purpose of the audit was to identify all loans where WFHMI charged per diem interest in violation of
Five days after sending its objection letter to the Cоmmissioner, Wells Fargo filed this suit in the U.S. District Court for the Eastern District of California, seeking declaratory and injunctive relief. Wells Fargo‘s position throughout this litigation has been that the Commissioner cannot require an audit because the relevant provisions of California law from which any such authority derives are preempted by federal laws and regulations—specifically, by the Bank Act, the DIDMCA, and the regulations promulgated by the Office of the Comptroller of the Currency thereunder,
The parties then cross-moved for summary judgment. The district court granted Wells Fargo‘s motion for summary judgment on the preemption claims and the Commissioner‘s motion for summary judgment on the retaliation claim. The court also entered a permanent injunction against the Commissioner, barring him from “exercising visitorial powers over Plaintiffs and from enforcing
II. Bank Act Preemption
As we observed three years ago:
Congress has legislated in the field of banking from the days of M‘Culloch v. Maryland, creating an extensive federal statutory and regulatory scheme. The history of national banking legislation has been “one of interpreting grants of both enumerated and incidental ‘powers’ to national banks as grants of authority not normally limited by, but rather ordinarily pre-empting, contrary state law.”
Bank of Am. v. City & County of San Francisco, 309 F.3d 551, 558 (9th Cir.2002) (quoting Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 32 (1996)) (citation omitted).
In light of this history, we held in Bank of America that the usual presumption against federal preemption of state law is inapplicable to federal banking regulation. See 309 F.3d at 558-59. Thus, “[i]n defining the pre-emptive scope of statutes and regulations granting a power to national
A. Operating Subsidiaries and the Bank Act
At the core of these appeals is
The Commissioner‘s central contention is that this regulation is beyond the scope of the OCC‘s delegated authority. More specifically, the Commissionеr maintains that because operating subsidiaries are not, themselves, “national banks,” they are therefore not subject to exclusively federal regulation to the same extent as are national banks. His argument therefore challenges the propriety of the regulation, raising a question of first impression in this circuit.10 Although posed in the singular, the question whether the OCC may preempt contrary state law as applied to operating subsidiaries of national banks
One final point bears mention at the outset: Because the partiеs’ arguments turn almost entirely on the OCC‘s interpretation of the Bank Act, a necessary threshold question to our analysis here is whether, and to what extent, the OCC‘s implementation of the Act, as manifested in § 7.4006, is entitled to deference.
The OCC is the agency “charged with supervision of the National Bank Act.” NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 256 (1995). Its rule-making authority is codified at
Except to the extent that authority to issue such rules and regulations has been expressly and exclusively granted to another regulatory agency, the Comptroller of the Currency is authorized to prescribe rules and regulations to carry out the responsibilities of the office, except that the authority conferred by this section does not apply to section 36 of this title [the McFadden Act] or to securities activities of National Banks under the Act commonly known as the “Glass-Steagall Act“.
As the definition makes clear, this conferral of regulatory authority is as broad as the OCC‘s statutory responsibilities, defined piecemeal throughout the Bank Act. See, e.g.,
Given this rulemaking authority, the OCC‘s interpretation of ambiguous language in the Bank Act is entitled to defеrence under the two-step framework of Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984):
Under the familiar two-step analysis in Chevron, if Congress has “directly spoken to the precise question at issue,” then the matter is capable of but one interpretation by which the court and the agency must abide. By contrast, where we determine that a statute is not clear, “the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.”
Vigil v. Leavitt, 381 F.3d 826, 834 (9th Cir.2004) (quoting Chevron, 467 U.S. at 842-43). As the statutory interpretation issues we must address to determine the validity of § 7.4006 devolve into separate questions, as we have explained, the relevant authority for each inquiry has separate statutory sources, and the Chevron inquiry is necessarily step-by-step. We therefore proceed to analyze the validity of § 7.4006—and the appropriate deference, if any, to accord to
B. The OCC‘s Authority To Allow National Banks To Operate Through Operating Subsidiaries
As noted, the Bank Act is silent regarding “operating subsidiaries.”12 Congress has thus not addressed, except indirectly, whether banks may organize and delegate banking functions to such entities in the first place. Thе Bank Act, however, does bestow upon national banks the authority “[t]o exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; ...”
Because § 24(Seventh) is not explicit on the limits of “incidental powers,” the OCC is entitled to Chevron step-two deference as to whether the Bank Act supports the creation of operating subsidiaries pursuant to that provision. See Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d 638, 640 (D.C.Cir.2000) (holding that the “incidental powers” provision permits “the Comptroller [to] authorize additional activities if encompassed by a reasonable interpretation of § 24(Seventh)“). Our inquiry, then, is whether the agency interpretation allowing operating subsidiaries as an exercise of “incidental powers” is reasonable. See, e.g., Hemp Indus. Ass‘n v. Drug Enforcement Admin., 357 F.3d 1012, 1015 (9th Cir.2004) (citing Barnhart v. Walton, 535 U.S. 212, 217-18 (2002)). We hold that it is.
The Supreme Court has approved the OCC‘s interpretation of the “incidental powers” provision as permitting a range of bank authority beyond that specified in the statute. As the Court has noted, because “the ‘business of banking’ is not limited to the enumerated powers[13] in § 24 Seventh ... the Comptroller therefore has discretion to authorize activities beyond those specifically enumerated.” NationsBank, 513 U.S. at 258 n. 2; see also Bank of Am., 309 F.3d at 562. At the same time, “[t]he exercise of the Comptroller‘s discretion, however, must be kept within reasonable bounds. Ventures distant from dealing in financial investment instruments—for example, operating a general travel agency—may exceed those bounds.” NationsBank, 513 U.S. at 258 n. 2.
[A] national bank‘s activity is authorized as an incidental power, “necessary to carry on the business of banking,” within the meaning of
12 U.S.C. § 24, Seventh , if it is convenient or useful in connection with the performance of one of the bank‘s established activities pursuant to its express powers under the National Bank Act. If this connection between an incidental activity and an express power does not exist, the activity is not authorized as an incidental power.
Id. at 432, quoted in M & M Leasing Corp. v. Seattle First Nat‘l Bank, 563 F.2d 1377, 1382 (9th Cir.1977); see also Nat‘l Retailers Corp. of Ariz. v. Valley Nat‘l Bank of Ariz., 604 F.2d 32, 33 (9th Cir.1979) (per curiam) (discussing our adoption of Arnold Tours in M & M Leasing). Applying this standard, we agree with the district court that the Comptroller had the authority under § 24(Seventh) to permit banks to delegate some of their banking functions to operating subsidiaries.
Allowing national banks to create, control, and delegate banking functions to operating subsidiaries provides some assistance to banks in performing their authorized activities. Indeed, the stated considerations motivating the initial adoption of the operating subsidiary rule in 1966 were that developing such subsidiaries would aid banks in “controlling operations costs, improving effectiveness of supervision, [providing for] more accurate determination of profits, decentralizing management decisions[,] or separating particular operations of the bank from other operations.” Operating Subsidiary Rule, 31 Fed. Reg. at 11,460. At the same time, permitting operating subsidiaries does nоt expand the functions carried out by the banks. The determination whether to conduct business through operating subsidiaries or, instead, through subdivisions of the bank itself is thus essentially one of internal organization, so long as the operating subsidiary form of organization cannot be used to evade the rules that apply to national banks. Under
Allowing national banks to conduct business through operating subsidiaries is therefore a permissible construction of those banks’ incidental powers under the Bank Act. We hold that the OCC‘s interpretаtion of
That the Bank Act may be construed as allowing private national banks to conduct business through operating subsidiaries does not, however, necessarily resolve whether the Act also delegates to the OCC the authority to regulate such entities. That is to say, § 24(Seventh) concerns the incidental powers of national banks, not the extent of the OCC‘s regulatory authority. Determining the reach of that authority is a separate question, involving the interpretation of
Section 93a, like the rest of the Bank Act, is silent as to the OCC‘s authority to regulate operating subsidiaries. This court has recognized, however, that the OCC‘s authority to interpret the reach of the “incidental powers” conferred by § 24(Seventh) necessarily includes the authority to regulate the exercise of those powers to assure that they remain “incidental” to the “business of banking.”
We so held in M & M Leasing, in which the central question was whether the leasing of automobiles by national banks was within the “incidentаl powers” of such banks, as the Comptroller had determined. After determining that, within limits, it is, we made clear that the Comptroller has both the authority and the “duty” “to promulgate reasonably detailed regulations which will confine leasing within the channels of the ‘business of banking.‘” 563 F.2d at 1384. M & M Leasing‘s conclusion that “[p]reparation of a comprehensive charter [for the exercise of “incidental powers“] is a function that belongs to the Comptroller,” id., necessarily makes the promulgation of such regulations one of the “responsibilities of the office” contemplated by § 93a, as to which the Commissioner has rulemaking power.
M & M Leasing‘s logic applies here. Just as the Comptroller‘s authority to regulate national banks’ leasing activities is inherent in his authority to interpret the “incidental powers” provision to allow such leasing in the first place, his authority to regulate operating subsidiaries also follows from the OCC‘s authority to allow such entities.
Further, the OCC operating subsidiary regulations most pertinent to the present inquiry quite directly address the reach of the national bаnks’ “incidental powers” authority to create and conduct their business through such entities. Those regulations, quoted above, restrict the range of activities that operating subsidiaries may conduct to those in which their parent banks may engage, see
In regulating the conduct of operating subsidiaries, moreover, the OCC is regulating only those activities it is explicitly authorized to regulate under the Bank Act. For federal regulatory purposes, in other words, the OCC is treating each operating subsidiary for the most part as if it were a national bank itself, conducting the same activities. In the latter instance, of course, the OCC‘s regulatory authority is unquestioned. As we concluded twenty-eight years ago, “whatever the scope of such [incidental] powers may be, we believe the
We conclude that the OCC has permissibly applied
D. The OCC‘s Exclusive Authority To Regulate Operating Subsidiaries
As the Supreme Court has explained:
When the administrator promulgates regulations intended to pre-empt state law, the court‘s inquiry is ... limited: “If [h]is choice represents a reasonable accommodation of conflicting policies that were committed to the agency‘s care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned.”
Fidelity Fed. Sav. & Loan Ass‘n v. de la Cuesta, 458 U.S. 141, 154 (1982) (quoting United States v. Shimer, 367 U.S. 374, 383 (1961)) (alteration in original); see also La. Pub. Serv. Comm‘n v. F.C.C., 476 U.S. 355, 369 (1986) (“Preemption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation.“); Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1128 (9th Cir.2005); Lopez v. Wash. Mut. Bank, FA, 302 F.3d 900, 906 (9th Cir.2002), amended by 311 F.3d 928 (9th Cir.2002).
Applying these principles here, we conclude that promulgating § 7.4006 was within the OCC‘s authority. Section 7.4006 provides that a state law is preempted as applied to an operating subsidiary only if it would be preempted as applied to a national bank. By so stating, the OCC has simply explicated further its specification, in
With this general approval of the OCC‘s preemptive authority regarding state law regulation of national bank operating subsidiaries in mind, we turn to the specific state laws that WFHMI and the OCC maintain are preempted under § 7.4006.
1. Visitorial Power Under the Bank Act
WFHMI and the OCC submit that the Commissioner‘s state law authority to conduct or require audits of national bank operating subsidiaries is displaced by § 7.4006. Their argument, with which we agree, is that section 54 of the Bank Act,
Since shortly after the Bank Act was enacted in 1864,17 see Nat‘l Bank v. Kentucky, 76 U.S. (9 Wall.) 353, 362 (1870), the Supreme Court has oft reiterated that federal substantive authority over national banks is not exclusive. Rather, states may regulate national banks where “doing so does not prevent or significantly interfere with the national bank‘s exercise of its powers.” Barnett Bank, 517 U.S. at 33; see also id. (citing cases). “Thus, states retain some power to regulate national banks in areas such as contracts, debt collection, acquisition and transfer of property, and taxation, zoning, criminal, and tort law.” Bank of Am., 309 F.3d at 559.
One area of authority over national banks that has historically been the exclusive province of the federal government, however, is the “visitorial” power. For purposes of the Bank Act and OCC regulations, the OCC has defined “visitorial” power as “(i) [e]xamination of a bank; (ii) [i]nspection of a bank‘s books and records; (iii) [r]egulation and supervision of activities authorized or permitted pursuant to federal banking law; and (iv) [e]nforcing compliance with any applicable federal or state laws concerning those activities.”
No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized.
As the definition makes clear, the preemption of state law accomplished by
Still, despite its procedural limitation, § 484(a) does “evidence[] a broad intent to preempt state law as to national banks.” Wachovia Bank, N.A. v. Burke, 319 F.Supp.2d 275, 279 (D.Conn.2004), aff‘d in part, rev‘d and vacated in part on other grounds, 414 F.3d 305 (2d Cir.2005); see also Guthrie v. Harkness, 199 U.S. 148, 159 (1905) (“It was the intention that this statute should contain a full code of provisions upon the subject, and that no state law or enactment should undertake to exercise the right of visitation over a national corporation. Except in so far as such corporation was liable to control in the courts of justice, this act was to be the full measure of visitorial power.“); Tiffany v. Nat‘l Bank of Mo., 85 U.S. (18 Wall.) 409, 412 (1873). The power the Commissioner claimed in ordering WFHMI and NCMC to audit their loan records rests on precisely the inspection and enforcement authority preempted by § 484(a). The OCC‘s conclusion that § 484(a) and § 7.4006, taken together, foreclose the exercise of such authority by the states, is thus eminently “permissible.” Chevron, 467 U.S. at 843.
We hold that the Commissioner is preempted from ordering regulatory audits of national bank operating subsidiaries such as WFHMI and NCMC, and that the injunction issued by the district court is valid insofar as it precludes the Commissioner from doing so.
2. Licensing Authority Under the Bank Act
WFHMI and, particularly, the OCC also argue that California‘s state real-estate lending licensing requirements are preempted as applied to national bank operating subsidiaries.
The state law requirements here at issue are codified in sections 50120-50130 of the California Finance Code, part of the CRMLA.19 Although the licensing requirements as a whole are too exhaustive to recount here, the most significant provisions are section 50121, which imposes four conditions on the granting of a license,20
A national bank must ordinarily “submit an application to, and receive approval from, the OCC,” before it acquires or establishes any operating subsidiary. See id.
In some circumstances, national banks can create or acquire an operating subsidiary without OCC approval, although notice to the OCC is required: Under
That the OCC has chosen to require formal agency approval in certain cases but not in others, to require notice in certain cases but not in others, and to specify the content of the application or notice in great detail indicates to us that § 5.34 manifests the OCC‘s intent to regulate pervasively the field of licensing operаting subsidiaries. Allowing certain national banks to create certain classes of operating subsidiaries without case-by-case approval is itself a regulatory decision. Where such a decision not to regulate represents, as in § 5.34, a considered determination that no regulation is appropriate, that choice preempts contrary state law imposing governing standards. See, e.g., Lodge 76, Int‘l Ass‘n of Machinists & Aerospace Workers v. Wis. Employment Relations Comm‘n, 427 U.S. 132, 140 (1976) (holding that, by regulating certain forms of economic pressure used during labor disputes but not others, Congress expressed a clear intent to leave other economic weapons free from federal or state regulation). Such field preemption can occur when an agency, acting pursuant to its delegated authority, promulgates regulations that evidence a clear intent to occupy a specific field. See, e.g., R.J. Reynolds Tobacco Co. v. Durham County, N.C., 479 U.S. 130, 149 (1986) (“[W]here, as in this case, Congress has entrusted an agency with the task of promulgating regulations to carry out the purposes of a statute, as part of the preemption analysis we must сonsider wheth-
As we emphasized earlier, Congress and the OCC, acting pursuant to congressional authority, have left some room for substantive regulation by the states in the field of banking. In the specific context of licensing requirements for operating subsidiaries authorized only to conduct those activities that their parent national banks may conduct, however, the OCC‘s regulations “evidence a desire to occupy a field completely.”23 Id. A state‘s attempt to require advance licensing before an operating subsidiary may engage in the activities covered by the Bank Act, including real estate lending, runs headlong into the OCC‘s finely nuanced licensing scheme.
We hold that California‘s real-estate lending licensing requirements as applied to operating subsidiaries of national banks are field-preempted by
III. DIDMCA Preemption
Wells Fargo also maintains that the California “per diem” loan-interest statute the Commissioner sought to enforce, precluding the charging of mortgage interest during certain pre-recordation periods, is substantively preempted by the DIDMCA. Despite our earlier rulings, we must decide this substantive preemption issue because it is pertinent to the reach of the permanent injunction the district court may properly issue.
In relevant part, the DIDMCA express preemption provision, section 501(a)(1), mandates that “[t]he provisions of the constitution or the laws of any State expressly limiting the rate or amount of interest, discount points, finance charges, or other charges which may be charged, taken, received, or reserved shall not apply to any loan, mortgage, credit sale, or advance ....” that meets certain conditions.
The California statutory provision with which we are concerned is
A borrower shall not be required to pay interest on a principal obligation under a promissory note secured by a mortgage or deed of trust on real property improved with between one to four residential dwelling units for a period in excess of one day prior to recording of the mortgage or deed of trust if the loan proceeds are paid into escrow or, if
there is no escrow, the date upon which the loan proceeds have been made available for withdrawal as a matter of right, as specified in subdivision (d) of Section 12413.1 of the Insurance Code.
If a congressional statute includes a provision explicitly preempting state law, the only issue we must decide is its scope, using ordinary tools of statutory construction. See, e.g., Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517-18 (1992); Indep. Towers of Wash. v. Washington, 350 F.3d 925, 928 (9th Cir.2003). The determinative question under the DIDMCA preemption provision,
The district court concluded that it does. In its words:
California‘s per diem statutes limit the time during which interest can be charged by prohibiting a lender from charging interest on loaned mortgage funds for a period in excess of one day prior to recordation of the mortgage. By restricting the time period in which a lender may collect interest on loaned mortgage funds, the language of the per diem statutes “expressly limit[s] the rate or amount of interest ... which may be charged....”
Wells Fargo II, 265 F.Supp.2d at 1175 (quoting
We do not agree with this interpretation of the DIDMCA. We are instead convinced by the First Circuit‘s analysis in Grunbeck v. Dime Savings Bank of New York, FSB, 74 F.3d 331 (1st Cir.1996), and believe it fully applicable to California‘s per diem loan-interest statute.
In Grunbeck, the court considered whether section 501(a)(1) of the DIDMCA preempted New Hampshire‘s simple interest statute (SIS), which required lenders to compute their interest rate by summing “simple interest,” i.e., by not charging interest on unpaid interest. See N.H. REV. STAT. ANN. § 397-A:14. Dime Savings Bank argued that requiring lenders to abide by the SIS would implicate the “rate or amount of interest” chargeable against the borrower, and that the SIS was therefore preempted by the DIDMCA. The First Circuit held that there was no DIDMCA preemption, for two primary reasons, both persuasive and both applicable here:
First, Grunbeck emphasized that the DIDMCA is concerned with only the “rate” and “amount” of interest charged, not with other features of the interest calculation:
[Dime Savings Bank‘s] arguments rest on the implicit premise that the “amount” of interest the lender may charge is “limited” by the SIS. On the contrary, the SIS imposes no restriction on either the “rate” or the “amount” of interest the borrower may be charged, but merely requires that any interest rate or amount agreed to by the parties be computed on a “simple interest” basis. Thus, nothing in the SIS prevents a lender from contracting for whatever simple interest rate will exact an interest return equal to or greater than whatever rate and amount of interest would be recoverable through compounding. The SIS leaves entirely to the parties the rate and amount of simple interest to be exacted.
Id. at 337.
Here, similarly, the only direct restriction was on the time for which interest may be charged, not on the rate that may be charged when interest is in effect or the total amоunt of interest that may be
Second, and relatedly, Grunbeck gave careful attention to an unusual feature of the language of section 501(a)(1) of the DIDMCA—that it preempts only express limitations on rates and amounts of interest. As Grunbeck explained, this textual feature must be given effect by “focus[ing] ... on whether the ‘express’ language of the [state statute] ‘limit[s]’ the rate or amount of interest which the lender may charge,” not “on broad-gauged assessments concerning the likely impact the [state] ban on compounding would have on home-mortgage lenders and the industry at large.” Id. at 337-38 (third alteration in original). Any other “analytic focus ... undermines the required ‘plain language’ interpretation by extirpating—from the pivotal section 501(a) clause: ‘expressly limiting the rate or amount of interest‘—the important modifier ‘expressly.‘” Id. at 337 (citation omitted).
With this textual analysis we agree as well. Here, as in Grunbeck, there may well be practical reasons why banks will not adjust their rates or amounts of interest to account for the state restriction. As Grunbeck held, however, the DIDMCA does not apply because of “likely impact,” as long as there is no express limitation on interest rates or amounts.27
Wells Fargo argues that, aside from any impact theory, the California per diem statute does expressly limit an interest rate—it limits interest to zero percent for the period prior to recordation. While clever, this argument again disregards the critical and unusual modifier, “expressly.”
“Expressly” the per diem interest statute addresses only the time period for which interest may be assessed, not the rate of interest permissible for a period during which some interest is payable. It would be odd to refer to a prohibition on collection of interest as a limitation specifically on the rate of interest, as opposed to a limitation on the imposition of interest or on the time period which interest may cover. Also, the evident purpose of the statute, albeit imperfectly addressed, is to protect consumers by providing an incentive for completion of tasks necessary to perfect the purchase, not to limit the rate or amount of interest paid; as long as recordation was completed, any amount of interest could be charged.
For these reasons, we hold that California‘s per diem interest statute,
As Justice Jackson forcefully put it a half-century ago, “[w]e cannot resolve conflicts of authority by our judgment as to the wisdom or need of either conflicting policy. The compact between the states creating the Federal Government resolves them as a matter of supremacy.” Franklin Nat‘l Bank of Franklin Square v. New York, 347 U.S. 373, 378-79 (1954).
“[A]s a matter of supremacy,” the Bank Act, read together with
We therefore remand these appeals to the district court for modification of the permanent injunction entered against the Commissioner, and for further proceedings as necessary, consistent with this opinion.
AFFIRMED in part, REVERSED in part, and REMANDED.29
Notes
No person shall engage in the business of making residential mortgage loans or servicing residential mortgage loans, in this state, without first obtaining a license from the commissioner in accordance with the requirements of Chapter 2 (commencing with Section 50120) or Chapter 3 (commencing with Section 50130), and any rules promulgated by the commissioner under this law, unless a person or transaction is excepted from a definition or exempt from licensure by a provision of this law or a rule of the commissioner.
(a) The filing with the commissioner of a complete and verified application for licensure.
(b) The filing as an exhibit to the application of a listing of material judgments filed against, and bankruptcy petitions filed by, the applicant for the preceding five years, and the disposition thereof.
(c) The payment of a nonrefundable investigation fee of one hundred dollars ($100),
In light of the foregoing discussion, one might expect that the proper route to evaluating whether the state law provisions can apply to national bank operating subsidiaries would be to apply the same analysis we applied to the visitorial preemption issue: If state licensing requirements are preempted as applied to national banks, then § 7.4006 precludes applying those requirements to operating subsidiaries. As it turns out, this straightforward approach does not work as applied to licensing requirements.
Licensing is one mode of regulation as to which there is no ready parallel between national banks and their operating subsidiaries. The California licensing requiremеnts at issue here, for example, do not apply to national banks. See
That California saw fit to exempt national banks from its mortgage-lending licensing requirements despite their prevalent activity in that area of business may well reflect the state‘s own conclusion—almost certainly a correct one—that the chartering of national banks by the federal government is an exclusive function, inconsistent with state licensing requirements unless they are federally authorized.21 Operating subsidiaries, however, are not directly chartered by the federal government; instead, they are incorporated under a state‘s law—WFHMI in California; NCMC in Ohio. This chartering distinction is the one irreducible difference between national banks and their oрerating subsidiaries, and precludes the direct transfer of the banks’ immunity from state entry barriers, such as licensing requirements, to their operating subsidiaries.
We are convinced, however, by the OCC‘s alternative argument—that California‘s attempt to license operating subsidiaries is field-preempted by the OCC‘s own licensing regulations.22
plus the cost of fingerprint processing and clearance, and an application filing fee of nine hundred dollars ($900).
(d) An investigation of the statements required by [California Financial Code §] 50124 based upon which the commissioner is able to issue findings that the financial responsibility, criminal records (verified by fingerprint, at the discretion of the commissioner), experience, character, and general fitness of the applicant and of the partners or members thereof, if the applicant is a partnership or association, and of the principal officers and directors thereof, if the license applicant is a corporation, support a finding that the business will be operated honestly, fairly, and in acсordance with the requirements of this division.