OCC Proposes Federal Preemption of State Interest-on-Escrow Laws

The Office of the Comptroller of the Currency ("OCC") proposed to issue a determination that would preempt state laws that require national banks and federal savings associations to pay interest on mortgage escrow accounts or that restrict related fees.

In its proposed determination, the OCC analyzed New York General Obligations Law § 5–601 ("Interest on Deposits in Escrow With Mortgage Investing Institutions"), which mandates the payment of interest on funds held in escrow for certain mortgages. The OCC concluded that the National Bank Act preempts this law because it prevents or significantly interferes with a national bank's exercise of its federal powers. Citing the Supreme Court’s Barnett Bank standard and its recent clarification in Cantero v. Bank of America, the OCC explained that state mandates deprive banks of the flexibility granted by federal law to make independent business judgments regarding the terms and conditions of their services.

The OCC further proposed that laws in 11 other states—California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Oregon, Rhode Island, Utah, Vermont, and Wisconsin—contain "substantively equivalent terms" to the New York statute and are also preempted. The OCC noted that these laws similarly interfere with a bank's ability to operate efficiently and effectively by dictating pricing models that may conflict with safe and sound banking practices. 

Comments on the proposal must be submitted on or before January 29, 2026.