Opinion ID: 3033121
Heading Depth: 4
Heading Rank: 1

Heading: Visitorial Power Under the Bank Act

Text: 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, 12 U.S.C. § 484, makes federal “visitorial” authority — but not necessarily federal substantive law — exclusive with regard to national banks, and § 7.4006 extends that exclusivity to operating subsidiaries. [11] 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. [12] 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.” 12 17 Although the Bank Act was promulgated in 1864, the current banking statutes largely derive from the Bank Act’s immediate predecessor, the National Currency Act of 1863, ch. 58, 12 Stat. 665. See U.S. Nat’l Bank of Ore. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 449 & n.4 (1993) (summarizing the statutory history). WELLS FARGO BANK v. BOUTRIS 10477 C.F.R. § 7.4000(a)(2). The exclusivity of federal visitorial authority over national banks is codified in the Bank Act, section 54 of which provides that: 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. 12 U.S.C. § 484(a).18 As the definition makes clear, the preemption of state law accomplished by § 484(a) is entirely procedural, not substantive. The exclusively federal power to “visit” national banks is not the power to oust all state regulation of those entities. Instead, the exclusivity of visitorial authority preempts only enforcement of state visitation laws by state officials, subject to the exceptions stated in § 484(a) itself. See, e.g., Nat’l State Bank, Elizabeth, N.J. v. Long, 630 F.2d 981, 989 (3d Cir. 1980); cf. Conference of Fed. Sav. & Loan Ass’ns v. Stein, 604 F.2d 1256, 1260 (9th Cir. 1979) (holding that regulatory control provided by California’s Housing Financial Discrimination Act is procedurally preempted by Federal Home Loan Bank Board authority), summarily aff’d, 445 U.S. 921 (1980) (mem.). National banks remain bound by state laws and regulations, except for those laws substantively preempted by other provisions of the Bank Act. [13] 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 18 But for minor technical corrections in 1913 and 1982, the provision remains unchanged from its initial codification in 1864. See Act of June 3, 1864, ch. 106, § 54, 13 Stat. 99, 116. 10478 WELLS FARGO BANK v. BOUTRIS on other grounds, No. 04-3770-CV, 2005 WL 1607740 (2d Cir. July 11, 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. [14] 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.