The OCC ordered federal preemption of state interest-on-escrow laws on May 15, 2026, invoking the National Bank Act and the Home Owners’ Loan Act. The determination covers New York’s General Obligations Law § 5-601 and substantively equivalent laws in 13 other states and territories, including Guam and the U.S. Virgin Islands.
Two coordinated final rules take effect June 18, 2026. The first codifies national banks’ and federal savings associations’ flexibility over escrow account terms, including whether to pay interest or assess related fees. The second is the preemption determination itself: federal law overrides any state rule that restricts that flexibility.
The OCC’s timing tracks the Second Circuit. The court ruled in Cantero v. Bank of America on May 5, 2026, ten days before the OCC acted, that New York’s interest-on-escrow requirement is preempted. The panel applied the Supreme Court’s Barnett Bank “nuanced comparative analysis” and cited the OCC’s then-proposed rules as persuasive authority. The OCC finalized those rules right after.
The determination won’t resolve the live circuit conflict it’s now embedded in. The First Circuit’s Conti decision and the Ninth Circuit’s Kivett ruling both held similar state laws are not preempted. The OCC can strengthen the doctrinal case for national banks, but it can’t bind other circuits, and a three-way split is now squarely positioned for en banc review or another Supreme Court rematch.
Both rules are effective June 18, 2026. National banks with escrow accounts in the 14 affected jurisdictions need to assess their practices before that date.
James Okafor