OCC CONFIRMS THAT OPERATING SUBSIDIARY CAN RELY ON HOME STATE LAW OF PARENT BANK
The Office of the Comptroller of the Currency issued an interpretive letter stating that the interest rates and fees constituting interest that may be imposed by an operating subsidiary should be based on the usury laws of the parent bank’s home state, even though the operating subsidiary itself has no offices in that home state. OCC Letter No. 1100 from Eric Thompson, Director Bank Activities and Structure (July 2008). The OCC stated that the operating subsidiary should impose and export interest rates and fees permitted by the home state of the parent bank without regard to usury laws of the state of residence of the borrowers under the same terms and conditions applicable to the parent bank
In reaching this conclusion, the OCC examined 12 U.S.C. § 85, OCC regulation Section 5.34, regarding operating subsidiaries, and other OCC preemption regulations. The OCC also examined the most favored lender doctrine established by Marquette Nat’l Bank of Minn. V. First of Omaha Service Corp., 439 U.S. 299 (1978). The OCC noted that under certain limited circumstances, national banks with branches in more than one state may be required to impose interest rates permitted by the law of a state in which they have a branch. The OCC explained that this would happen in circumstances where three functions – loan approval, communication of loan approval, and disbursal of loan proceeds – all occur in a branch or branches in the same branch state. Absent this set of circumstances, the OCC stated the national bank should rely on the state law where its main office is located.