Watters v. Wachovia Bank, N. A., 550 U.S. 1 (2007)
Primary Holding
The business activities of national banks, including mortgage lending conducted through operating subsidiaries, are governed exclusively by the National Bank Act and the regulations of the Office of the Comptroller of the Currency, thereby exempting them from state licensing and regulatory requirements.
In the case of Watters v. Wachovia Bank, the Supreme Court decided that national banks, like Wachovia, can conduct their mortgage lending through separate companies without needing to follow state rules. This is important because it means that national banks are only regulated by federal laws, which can simplify things for them but may limit state oversight. For consumers, this case is relevant if you're dealing with a national bank for loans or mortgages, as it affects how those banks operate and what protections you might have under state laws.
AI-generated plain-language summary to help you understand this case
In *Watters v. Wachovia Bank, N.A.*, the dispute arose from the operations of Wachovia Mortgage Corporation, a wholly owned subsidiary of Wachovia Bank, which is a national bank chartered by the Office of the Comptroller of the Currency (OCC). Wachovia Mortgage engaged in real estate lending in Michigan, where state law required mortgage brokers, lenders, and servicers that are subsidiaries of national banks to register with the Michigan Office of Insurance and Financial Services (OIFS) and comply with state supervision. Although Wachovia Mortgage was registered with OIFS from 1997 to 2003, the central question was whether its mortgage lending activities were subject to state regulation when conducted through an operating subsidiary, as opposed to directly by the national bank itself. The procedural history of the case began when Linda A. Watters, the Commissioner of the Michigan Office of Insurance and Financial Services, challenged Wachovia's assertion that its mortgage lending activities were exempt from state oversight due to the national bank's federal charter. The case progressed through the lower courts, ultimately reaching the United States Court of Appeals for the Sixth Circuit, which ruled in favor of Wachovia, affirming that the bank's mortgage business was under the jurisdiction of the OCC and not subject to state licensing and regulatory requirements. The relevant background context includes the regulatory framework established by the National Bank Act (NBA), which grants national banks the authority to conduct various banking activities, including real estate lending, and allows them to operate through subsidiaries. The OCC is tasked with overseeing national banks and their subsidiaries, exercising significant visitorial powers that limit the authority of state regulators. This case highlighted the tension between state regulatory frameworks and federal oversight of national banks, particularly regarding the operations of their subsidiaries in the banking sector.
Whether the mortgage lending activities of a national bank's operating subsidiary are subject to state licensing and auditing requirements, or whether they fall exclusively under the supervision of the Office of the Comptroller of the Currency.
The judgment is reversed.
- Court
- Supreme Court
- Decision Date
- November 29, 2006
- Jurisdiction
- federal
- Case Type
- landmark
- Majority Author
- Ginsburg
- Damages Awarded
- N/A
- Data Quality
- high
Wachovia Bank, N. A. v. Schmidt, 546 U.S. 303 (2006)
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Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71 (2006)
Consumer LostTitle I of the Securities Litigation Uniform Standards Act of 1998 (SLUSA) preempts state-law class action claims alleging misrepresentation or omission of material facts in connection with the purchase or sale of covered securities, regardless of whether federal law provides a private remedy for those claims.
Central Va. Community College v. Katz, 546 U.S. 356 (2006)
Consumer WonCongress has the authority to abrogate state sovereign immunity in bankruptcy proceedings, allowing a bankruptcy trustee to pursue actions against state agencies to recover preferential transfers made by a debtor.
Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007)
Consumer LostThe Supreme Court held that federal securities laws implicitly preclude the application of antitrust laws to the conduct of underwriters in the context of initial public offerings, as there is a "plain repugnancy" between the two legal frameworks regarding the practices alleged in the case.