OCC express powers and preemption rules
Oregon v. Office of the Comptroller of the Currency
Date: Aug. 11, 2026
Issue: Whether the OCC exceeded its statutory authority and violated the Administrative Procedure Act (APA) by issuing the Escrow Powers and Preemption Rules to preempt state interest-on-escrow laws.
Case Summary: Nine states sued the OCC, alleging it exceeded its authority and violated the APA by issuing its Escrow Powers and Preemption Rules (collectively the rules).
The OCC issued two final rules on May 15, 2026, addressing state interest-on-escrow laws. The Preemption Rule declared that New York’s interest-on-escrow law and 13 similar state laws were preempted by federal law because they significantly interfere with national bank powers under Barnett Bank. According to Oregon, New York, California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island, and Vermont (the states), the OCC misapplied Barnett Bank, conflicted with the Ninth Circuit’s decision in Lusnak, and adopted a broad approach to preemption that the Supreme Court rejected in Cantero.
The OCC also issued the Escrow Powers Rule, which declares that national banks may establish and maintain escrow accounts and set their terms and conditions, including whether to pay customers interest or other compensation. The states alleged that the OCC failed to identify evidence that state interest-on-escrow laws interfere with bank operations or create market disruption. Instead, they argued that the OCC adopted the rule to create a federal conflict with state law and support its broader preemption determination.
The states argued that the Escrow Powers and Preemption Rules violate the APA for five reasons. First, the states argued that the OCC exceeded its rulemaking authority by creating a broad new national bank power in the Escrow Powers Rule. According to the states, the OCC created that power to support preemption under the Preemption Rule, despite the limits Congress placed on OCC preemption authority in Dodd-Frank.
Second, the states argued that the rules fail Dodd-Frank’s substantive preemption requirements. The states maintained that the OCC focused on whether state laws limit bank “flexibility” instead of whether they prevent or significantly interfere with national bank powers under Barnett Bank.
Third, the states argued that the rules conflict with Cantero because the OCC adopted a categorical approach without examining the nature and degree of interference caused by each state law.
Fourth, the states argued that the OCC failed to meet Dodd-Frank’s procedural requirements because it did not support the rules with substantial evidence or review each state law on a case-by-case basis. Instead, the states claimed that the OCC analyzed New York’s law and grouped the remaining laws.
Finally, the states argued that the rules are arbitrary and capricious because they lack a factual basis, rely on speculation, and fail to consider their effects on consumers and the financial system.
Bottom Line: The states seek a judgment vacating the rules and declaring them unlawful.
Document: Complaint
