Circuit split and OCC preemption rule tee up likely SCOTUS review of national-bank escrow
Second, First and Ninth Circuits diverge on whether state escrow-interest laws survive National Bank Act preemption, the OCC's 2026 final rule sides with the Second Circuit, and ten state AGs are now challenging the OCC in Oregon federal.
Cantero II, Conti, and Kivett present a clean three-way circuit split on the same question: do state laws requiring national banks to pay interest on residential mortgage escrow accounts significantly interfere with federally authorized banking powers under the Dodd-Frank Section 25(b) standard articulated in Barnett Bank? The Second Circuit, on remand from the Supreme Court's 2024 decision, said yes for New York's 2% mandate; the First and Ninth Circuits said no for comparable Rhode Island and California rules. Cert petitions are pending in Cantero and Kivett, with Conti potentially cycling back as well. In May 2026 the OCC added a regulatory front, issuing a final rule and a preemption determination covering New York and 13 other state laws; the OCC concluded the statutes significantly interfere with national bank discretion over escrow terms. Ten state attorneys general have now sued in Oregon federal district court, arguing the OCC exceeded its authority and failed to satisfy Dodd-Frank's preemption-determination criteria. For major-firm clients, the stakes extend well beyond escrow accounts: a Second Circuit/OCC victory would expose a broader swath of state consumer-finance laws to preemption challenges, while a First/Ninth Circuit win would preserve substantial state regulatory authority. Watch for cert grants, an Oregon stay of the OCC rule, and any SCOTUS hold pending the AG litigation.