Overview
- A coalition of ten state attorneys general filed a federal lawsuit in Portland, Oregon, on Tuesday seeking a court order to declare two May OCC rules unlawful and to vacate them.
- The OCC finalized the pair of rules on May 15, 2026, and they took effect June 18; one rule lets nationally chartered banks set escrow terms and the other says federal law preempts state escrow‑interest statutes.
- The states contend the agency exceeded its authority under the Dodd‑Frank Act and violated the Administrative Procedure Act and ask the court to restore states’ ability to require interest on escrow balances.
- Plaintiffs and legal commentators say the rules would allow OCC‑regulated banks not to pay interest on mortgage escrow accounts in the 14 states and territories with such laws, reducing income homeowners currently receive and creating a competitive gap with state‑chartered banks.
- The case will test where federal preemption ends and state consumer protections begin; courts are watching closely because conflicting appellate decisions have already split judges on the issue and the outcome could change how lenders handle escrow funds nationwide.