WASHINGTON — A bid by the Office of the Comptroller of the Currency to sidestep state laws requiring national banks to pay interest on mortgage escrow accounts is being blasted as an unlawful attempt to revive broad federal preemption powers curtailed after the financial crisis, state regulators and consumer advocates told Bloomberg Law.
In December, the OCC unveiled two proposals that together would allow national banks to avoid complying with state escrow-interest mandates. One would give federally chartered banks broad discretion to design escrow accounts — including whether to pay interest — while the second would formally preempt similar laws in roughly a dozen states, including New York and California, Bloomberg Law reported.
State supervisors and mortgage regulators warned in a joint filing that the plan violates both congressional intent and Supreme Court precedent limiting the OCC’s authority to issue sweeping preemption determinations. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators told Bloomberg Law that the agency cannot simply invent a discretionary power and then use it to override state consumer protections.
Their challenge comes after a 2024 Supreme Court ruling that required a more case-by-case analysis of whether state laws truly interfere with national bank operations before they can be preempted — a standard the OCC’s proposal fails to meet, critics said to Bloomberg Law.