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The Office of the Comptroller of the Currency (OCC) is asking a federal court in Oregon to dismiss a lawsuit by 10 states challenging the agency’s mortgage-escrow actions. Alternatively, the OCC wants the case transferred to federal court in Washington, D.C. The motion, filed October 5, 2026, does not ask for a stay, and the filing report did not report a ruling.
What the states are challenging
The lawsuit was brought by Oregon, New York, California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island and Vermont. It challenges two separate OCC actions finalized in May 2026:
- An escrow-powers rule: The OCC says national banks and federal savings associations may establish or maintain real-estate lending escrow accounts and make business judgments about their terms, including whether to pay interest or charge related fees.
- A preemption determination: The OCC concluded that the National Bank Act preempts New York’s interest-on-escrow law and 13 other state or territorial laws with substantively equivalent terms. The agency says the determination also applies to federal savings associations under the Home Owners’ Loan Act.
These are distinct actions, and the OCC says they rest on distinct authorities. Its position is that the rule describes banks’ powers, while the separate determination addresses whether particular state laws are preempted. The states’ challenge and the OCC’s defense remain unresolved.
Why the OCC says the case should be dismissed
The arguments below are the agency’s positions as reported by Consumer Finance Monitor; they are not findings by the Oregon court.
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Standing and ripeness
The OCC argues that the states have not identified a bank that stopped paying escrow interest—or is about to stop paying it—because of the OCC actions. In the agency’s view, the rule recognizes banks’ discretion but does not require them to stop paying interest, so the states’ asserted injury depends on future choices that may not happen. The OCC also argues that the states cannot claim parens patriae standing against the federal government based only on possible harm to their residents.
The OCC’s argument about Cantero II
The OCC says the Second Circuit’s May 5, 2026, decision in Cantero II had already held New York’s law preempted before the agency finalized its actions. It argues that this creates traceability and redressability problems for New York, Connecticut and Vermont. That is the OCC’s litigation theory; the Oregon court has not ruled on it.
Venue and transfer
The OCC argues that Oregon is an unsuitable venue for most of the plaintiffs because the agency, its decision-making and the administrative record are centered in Washington, D.C. It asks the court to transfer the case to the U.S. District Court for the District of Columbia if it does not dismiss the suit. A transfer would change which district court handles the case; it would not decide whether the OCC’s actions are lawful.
How the escrow-interest dispute fits the preemption law
The governing framework is the National Bank Act’s conflict-preemption standard, associated with Barnett Bank and reaffirmed by the Supreme Court in Cantero v. Bank of America, N.A. (2024). Cantero directs courts to assess in practical terms the nature and degree of interference a state law causes to national-bank powers, considering the laws’ text and structure, precedent and common sense. The Supreme Court did not decide in Cantero whether state interest-on-escrow laws are preempted.
The OCC’s final determination describes a split among federal appeals courts: the Second Circuit concluded that New York’s law is preempted, while the First and Ninth Circuits reached contrary outcomes concerning Rhode Island and California laws. That disagreement helps explain why the OCC issued its determination, but it does not itself resolve the states’ challenge to the agency’s actions.
As the OCC describes it, New York General Obligations Law § 5-601 requires at least 2% annual interest—or a rate set by the state superintendent—on certain covered escrow balances. The OCC says the interest is credited quarterly and the law generally bars service charges for maintaining the account. This description and the conclusion that federal law preempts the state requirement are the agency’s positions, not a ruling by the Oregon court.
What the motion could mean for the case
The procedural paths differ in whether the case continues, whether a court reaches the merits, where the case is heard and whether it is delayed.
| Possible outcome | Does the case continue? | Would this outcome decide the merits? | Forum or timing effect |
|---|---|---|---|
| Dismissal | It could end the district-court case. | Dismissal could occur without a decision on the legality of the OCC actions. | The case would not proceed in Oregon unless the dismissal were reversed or a further case were brought. |
| Transfer | Yes; the challenge would move to another court. | Transfer alone would not uphold or invalidate the OCC actions. | The District of Columbia would handle the case instead of Oregon. |
| Continued litigation in Oregon | Yes. | Further proceedings could include review of the OCC’s authority and preemption analysis. | The case would remain in the District of Oregon. |
| Stay | The case would remain pending but paused. | A stay would not itself decide the merits. | Proceedings would be delayed while the stay remained in effect. |
The OCC’s motion seeks dismissal or, alternatively, transfer—not a stay. A contemporary legal analysis identified a possible reason the court might consider a pause: on October 5, the Supreme Court requested the Solicitor General’s views on pending interest-on-escrow petitions. That possibility is separate from the relief requested in the OCC motion.
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Do banks still have to pay interest on mortgage escrow accounts?
The OCC has issued a preemption determination, but the states are challenging the agency’s actions, and the legal question remains contested. Whether a particular bank must pay interest can depend on the applicable state law, the type of institution and how the governing federal law is ultimately interpreted. The OCC’s determination should not be described as a court judgment resolving the states’ lawsuit.
The OCC’s final determination says its legal approach does not require the agency or a national bank to show that compliance with state interest-on-escrow laws would cause financial harm. That is the OCC’s explanation of its analysis, not a finding that a particular consumer or bank has experienced a specific outcome.
What is at stake for consumers and lenders
The OCC’s final determination summarizes competing policy arguments. Supporters said preemption could improve uniformity, reduce operational complexity and support lending. Opponents raised concerns about mortgage affordability, consumer protection, fairness, competition between lender types and litigation risk. These are predicted effects advanced in the policy debate, not established outcomes of the challenged actions.
The OCC said it did not rely on technical studies or data for its legal analysis. The litigation therefore centers on the agency’s authority and the legal effect of state escrow-interest requirements, rather than on a demonstrated estimate of how much borrowers will gain or lose.
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