National Bank Act preemption
Conti v. Citizens Bank N.A.
Date: March 25, 2026
Issue: Whether the U.S. Supreme Court should review a First Circuit decision that ruled the National Bank Act (NBA) did not preempt Rhode Island’s interest‑on‑escrow (IOE) law.
Case Summary: The U.S. Supreme Court declined to review a First Circuit decision which ruled that the NBA did not preempt Rhode Island’s IOE law.
Section 1044 of the Dodd-Frank Act codified the NBA preemption standard from the Supreme Court’s decision in Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), ruling the NBA preempts state law if it “prevents or significantly interferes with the exercise of a national bank’s power.”
Under Rhode Island’s IOE law, banks must pay interest on amounts customers deposit into mortgage escrow accounts. Conti and a class of borrowers (plaintiffs) sued Citizens Bank, alleging it breached its mortgage agreement by failing to pay the required interest. Citizens Bank moved to dismiss, arguing the NBA preempts plaintiffs’ claims because it need not pay interest on mortgage escrow accounts under the NBA. In September 2022, Judge Mary S. McElroy of the U.S. District Court for Rhode Island dismissed plaintiffs’ lawsuit, holding that the NBA preempted the IOE law. While Conti’s appeal was pending, the Supreme Court granted certiorari in Cantero, prompting the First Circuit to stay the case.
On May 30, 2024, the Supreme Court vacated the Second Circuit’s ruling, explaining the Dodd-Frank Act expressly incorporated the preemption standard from Barnett Bank. That standard, according to the Court, did not permit “bright line” rules, but requires courts to engage in a “practical assessment of the nature and degree of the interference caused by a state law” and conduct a “nuanced comparative analysis,” looking at Barnett Bank and the decisions cited in that opinion. After Cantero, ABA filed a coalition amicus brief urging the First Circuit to affirm that the NBA preempts Rhode Island’s IOE law. ABA argued mortgage escrow accounts are critical tools in the U.S. banking system, and Rhode Island’s pricing scheme significantly interferes with the exercise of national bank powers.
However, on Sept. 29, 2025, a unanimous First Circuit panel vacated the district court’s decision, ruling the lower court failed to apply the preemption framework clarified in Cantero. The panel explained that courts must conduct a “practical assessment” of the nature and degree of interference a state law imposes on national bank powers, using a nuanced comparison to Supreme Court precedent rather than categorically preempting laws that regulate banks. Applying that approach, the panel found no express conflict between the National Bank Act and Rhode Island’s IOE law and determined that the district court had not performed the required analysis.
The panel compared relevant precedents and found cases like Barnett Bank and Fidelity Federal Savings & Loan Ass’n v. De la Cuesta inapposite because the NBA neither expressly prohibits state IOE laws nor grants national banks exclusive control over escrow interest decisions. It further noted that cases involving generally applicable state laws offered limited guidance, as the IOE law directly regulates banking activity. The panel also rejected Citizens Bank’s “patchwork” preemption theory, finding no congressional intent to preempt laws like Rhode Island’s. Concluding that Citizens Bank failed to meet its burden, the panel remanded for further proceedings consistent with the Supreme Court’s decision.
Citizens Bank petitioned the U.S. Supreme Court, arguing the First Circuit misapplied Cantero’s preemption framework by discounting key precedents, imposing an improper express-conflict requirement, and misreading the Dodd-Frank Act. It contended that state IOE laws significantly interfere with national banks’ powers by regulating pricing and limiting flexibility over escrow accounts. It also warned that allowing such laws would create a patchwork of inconsistent state rules, increasing costs and uncertainty. It thus urged the Court to grant review and clarify the proper preemption standard.
On March 25, 2026, ABA filed another coalition amicus brief urging the Court to grant Citizens Bank’s petition. ABA argued that lower courts are sharply divided over Cantero, immediate review is needed to prevent the spread of state pricing mandates, and the First Circuit’s decision cannot be reconciled with Cantero’s significant interference framework. But the U.S. Supreme Court denied Citizens Bank’s petition without providing further commentary.
Bottom Line: The Supreme Court’s denial leaves the First Circuit’s Conti decision intact, allowing Rhode Island’s IOE law to stand. As of May 1, 2026, the Second Circuit has not issued its ruling on remand from the Supreme Court in Cantero.
