Two controversial rules issued by the Office of the Comptroller of the Currency to free national banks and their mortgage subsidiaries from compliance with state predatory lending laws went into effect Feb. 12.However, a legal test of the OCC's rule is scheduled for a court hearing in March. The case pits Wachovia Mortgage against Michigan banking superintendent Linda Watters. Backed by the OCC, Wachovia Mortgage maintains that it does not have to get a license to originate mortgage loans in Michigan and the state does not have the authority to audit or take enforcement actions against it. A similar case involving Wachovia Mortgage is pending in Connecticut. "Wachovia Mortgage's claim of total immunity from state oversight must be rejected," according to an amicus brief filed by 40 state attorneys general on behalf of the Michigan superintendent. The Conference of State Bank Supervisors also argues that the OCC's pre-emption rules fly in the face of "established laws and judicial precedents." But the OCC contends that the rules are misunderstood. "Our jurisdiction over national banks and their subsidiaries should not deprive state regulators of a role in protecting consumers," OCC chief counsel Julie Williams said. She called on state officials to refer consumer complaints about national banks to the OCC for investigation.

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