United States Supreme Court Denies Certiorari in Bank of America, N.A. v. Lusnak: U.S. Supreme Court Declines Review of Ninth Circuit’s Holding That the National Bank Act Does Not Preempt California Law Requiring Banks to Pay Interest on Mortgage Escrow Accounts

Sullivan & Cromwell LLP - November 21, 2018

On Monday of this week, the U.S. Supreme Court denied Bank of America’s petition for certiorari to review the decision of the U.S. Court of Appeals for the Ninth Circuit that the National Bank Act (“NBA”) does not preempt a California law requiring lenders to pay a minimum 2% interest rate on mortgage escrow accounts. The Ninth Circuit held that the California law was not preempted under the NBA, because the law did not “significantly interfere” with Bank of America’s exercise of its banking powers. The Ninth Circuit rejected the contrary position of the Office of the Comptroller of the Currency (“OCC”), holding that the OCC’s position was entitled to little, if any, weight. The Supreme Court still has not addressed the issue of national bank preemption since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which included a specific provision relating to national bank preemption.

The Ninth Circuit’s decision could have significant implications for national banks. Beyond the exposure of national banks to non-uniform state requirements relating to mortgage escrow accounts, the decision could create a significantly higher standard for national banks to invoke preemption of certain state laws.