10 State Attorneys General Sue OCC Over Mortgage Escrow Preemption Rules

Ten state Attorneys General sued the OCC to block two rules that preempt state laws requiring banks to pay interest on mortgage escrow account balances.

The lawsuit, led by the Attorneys General of Oregon and New York, challenged two May 2026 OCC rules overriding state mandates on escrow accounts. The states argued the OCC exceeded its statutory authority under the Administrative Procedure Act and Dodd-Frank's limits on OCC preemption authority.

One rule codified national banks' discretion to decide whether to pay interest on escrowed funds, and the companion rule preempted 14 state and territorial laws requiring such payments (see prior coverage). Escrow accounts hold funds earmarked for property tax and insurance payments and are separate from a borrower's mortgage principal.

The states argued that the OCC's approach revives a preemption standard that the U.S. Supreme Court has repeatedly rejected. The Attorneys General of California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island, and Vermont joined the case. States of Oregon & New York, et al. v. Office of the Comptroller of the Currency & Jonathan Gould was filed in the U.S. District Court for the District of Oregon.