In a January 29 letter to the OCC, the attorney general of New York, along with other state attorneys general and state banking regulators, called for the OCC to abandon two proposed rules that serve to reinforce federal banking authority over interest-on-escrow laws and real estate lending escrow accounts. As previously covered by InfoBytes, in the first proposed rule, the OCC took the position that certain state interest-on-escrow laws are preempted by the National Bank Act. In the second proposed rule, the OCC included language to “codify” the authority of national banks and federal savings associations to establish and maintain real estate lending escrow accounts, contending that RESPA “implicitly recognizes” the flexibility of banks in managing escrow funds.
In the letter, the state attorneys general and state banking regulators argued that the enactment of these rules would deprive states of their legitimate constitutional authority to protect their consumers, including in their interactions with national banks. In particular, the letter asserted that: (i) numerous states have enacted laws to protect consumers from abuses in the mortgage-escrow market (including those that require state or national banks to pay mandatory minimum interest on certain escrow accounts); (ii) through its enactment of RESPA, Congress did not authorize national banks to operate mortgage-escrow accounts in a manner that disregards generally applicable state laws, including laws imposing minimum interest payments; and (iii) numerous courts have concluded that state minimum interest laws do not significantly interfere with national banks’ operations.
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