Wells Fargo Loses Pre-emption Appeal

A U.S. appeals court has ruled that Wells Fargo Bank NA and its mortgage subsidiary must comply with a California law that prohibits lenders from charging interest prior to the recordation of a mortgage.The 9th Circuit Court of Appeals ruled that the Depository Institutions Deregulation and Monetary Control Act of 1980 does not "expressly" pre-empt the state's prohibition on per-diem interest charges prior to recordation. Despite the ruling, Wells Fargo maintains that the National Banking Act and regulations by the Office of the Comptroller of the Currency allow national banks to charge interest once the money is given to the customer. "We believe our practices are consistent with [OCC] rules," the company said. The circuit judges also ruled that the California commissioner of corporations, Demetrios Boutris, cannot enforce the "per diem" law -- only the OCC can order audits or inspect national banks and operating subsidiaries. "The exclusively federal power to 'visit' national banks is not the power to oust all state regulation of those entities," the appeals court says. "Instead, the exclusivity of visitorial power preempts only enforcement of state visitation laws by state officials, subject to" certain exceptions.