- within Insolvency/Bankruptcy/Re-Structuring topic(s)
On August 11, 2026, a coalition of ten state attorneys general filed suit in the U.S. District Court for the District of Oregon challenging two OCC rules that preempt certain state laws requiring national banks and federal savings associations to pay interest on funds held in mortgage escrow accounts. The states allege that the rules violate the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Administrative Procedure Act (APA).
The OCC issued the two final rules on May 15, 2026 (previously discussed here). The first codifies the OCC's position that federally chartered institutions have authority to determine the terms and conditions of mortgage escrow accounts, including whether to pay interest. The second determines that federal law preempts interest-on-escrow laws in 14 states and territories. The states contend that the OCC exceeded the limits Congress placed on national bank preemption under Dodd-Frank. The states seek an order declaring the rules unlawful and vacating them.
Putting It Into Practice: The lawsuit adds to ongoing disputes between federal banking regulators and states over the scope of federal preemption (previously discussed here). National banks, federal savings associations, mortgage servicers, and other market participants should monitor the litigation and evaluate whether future rulings affect escrow practices and state-law compliance obligations.
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