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Speaking at the Clearing House’s annual conference, Comptroller of the Currency Jonathan Gould assured industry leaders that the agency remains steadfast in defending federal preemption under the National Bank Act. Gould’s comments come in the wake of recent federal appellate court decisions in the Ninth and First circuits, which challenged the OCC’s stance by finding that the National Bank Act does not override certain state laws requiring national banks to pay interest on mortgage escrow accounts.
Federal preemption under the National Bank Act is crucial for national banks, as it enables them to operate efficiently and to provide consistent services nationwide. From the banking industry’s perspective, weakening preemption would lead to a patchwork of state regulations, increasing compliance costs, and reducing operational efficiency. Recognizing these risks, the Office of the Comptroller of the Currency (OCC) has in recent years vigorously defended its federal preemption regulations. These rules are grounded in Dodd-Frank’s adoption of the Supreme Court’s Barnett Bank of Marion County N.A. v. Nelson standard, which applies preemption when state laws “prevent or significantly interfere with” a national bank’s core powers. In its amicus briefs in the most recent cases on this issue, the OCC has maintained that state escrow interest laws and interchange fee restrictions can disrupt the uniform management of deposit-related services, justifying federal preemption.
Recent First and Ninth Circuit Opinions Reject Preemption Arguments
Despite the OCC’s position, federal appellate courts — guided by the Supreme Court’s decision in Cantero v. Bank of America, which instructs courts to pragmatically assess the degree to which state regulations interfere with national bank powers under Barnett Bank — have rejected the argument that the National Bank Act categorically preempts state escrow interest laws.
In September 2025, the First Circuit Court of Appeals in Conti v. Citizens Bank, N.A. held that Rhode Island’s interest-on-escrow law was neither in conflict with nor preempted by the National Bank Act. The court found that the law, which, as of January 2025, mandates at least 0.5% annual interest on certain residential mortgage escrow accounts, was generally applicable to bank products and did not discriminate against national banks, reinforcing the principle that national banks may be subject to broad state laws. The First Circuit noted that the National Bank Act did not expressly prohibit Rhode Island’s interest-on-escrow requirements nor reserve to national banks the exclusive power to decide whether to pay interest on escrow accounts. The court also found that the law did not interfere with bank powers or create significant burdens for Citizens Bank.
Likewise, in October 2025, the Ninth Circuit Court of Appeals in Kivett v. Flagstar Bank held that the National Bank Act did not preempt California’s interest-on-escrow laws. William Kivett, representing a class of Flagstar Bank customers, claimed that Flagstar failed to pay interest on mortgage escrow accounts as required by California’s Unfair Competition Law, which mandates at least 2% annual interest on certain residential mortgage escrow accounts. Flagstar argued for preemption, but both the district court and a divided Ninth Circuit panel disagreed. The majority relied on its earlier decision in Lusnak v. Bank of America, concluding that Lusnak was not irreconcilable with Cantero. The court explained that Cantero did not mandate a single approach for preemption analysis or conflict with Lusnak’s framework. While Cantero emphasized a “practical assessment” of interference with national bank powers, the panel noted that courts may also consider legislative history and statutory context, as in Lusnak.
Both courts declined to defer to the OCC’s preemption regulations, citing the Dodd-Frank Act’s mandate that preemption determinations be made on a “case-by-case basis.” Only the dissenting judge in Kivett believed the OCC’s regulations deserved greater consideration.
The Road Ahead
In response to the mounting legal uncertainty surrounding the National Bank Act’s preemption, Gould outlined a three-part strategy: (1) proactively file amicus briefs to defend preemption regulations; (2) work with the U.S. Department of the Treasury to consider potential updates to preemption regulations; and (3) mobilize industry and political allies to protect the national banking charter.
Gould’s remarks underscore the OCC’s determination to uphold its regulatory preemption framework amid increasing judicial skepticism. Nevertheless, recent appellate decisions have cast doubt on the ongoing value of a national bank charter, as banks face escalating compliance uncertainty across jurisdictions. As the OCC strives to reinforce its preemption regulations in this evolving legal landscape, national banks must brace for a potentially more fragmented, state-driven compliance environment. The growing consensus among federal appeals courts against preemption of escrow interest laws signals a new compliance reality for entities holding a national bank charter.
