Ten states filed a lawsuit on August 11, 2026, against the Office of the Comptroller of the Currency and Comptroller Jonathan V. Gould, challenging two federal rules that block state laws requiring banks to pay interest on mortgage escrow accounts.
The lawsuit, filed in the U.S. District Court for the District of Oregon by the states of Oregon, New York, California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island, and Vermont, targets the OCC’s “Escrow Powers Rule” and “Preemption Rule.”
Issued on May 15, 2026, and taking effect on June 18, 2026, the rules allow national banks and federal savings associations to decide whether to pay interest or charge fees on funds held in escrow accounts, overriding state regulations.
Mortgage escrow accounts hold funds collected monthly from homeowners to cover annual property taxes and home insurance premiums. Beginning in the 1970s, states enacted laws mandating minimum interest payments on these balances to prevent lenders from collecting unearned financial returns on borrower deposits.
According to the complaint, the OCC’s actions exceed its statutory authority under the Administrative Procedure Act and conflict with the Dodd-Frank Wall Street Reform and Consumer Protection Act. The state attorneys general argue that federal law permits state consumer financial protection regulations unless a state law prevents or significantly interferes with a national bank’s powers, as established in the Supreme Court case Barnett Bank of Marion County, N.A. v. Nelson.
The filing further cites recent Supreme Court precedent in Cantero v. Bank of America, N.A., which rejected categorical preemption standards in favor of a practical, case-by-case assessment of degree of interference.
The states contend the OCC failed to conduct required individual evaluations for each state’s statute or present substantial evidence demonstrating that state interest requirements impair banking operations.
In a press release issued alongside the final rules, the OCC defended its preemption determination, stating, “The OCC’s actions emphasize federal preemption as a critical tool for reducing unnecessary burden, enabling local and national prosperity, and unleashing economic growth.”
The plaintiff states are asking the federal court to declare both the Escrow Powers Rule and the Preemption Rule unlawful under the Administrative Procedure Act and to set them aside entirely.
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