Flagstar Bank, N.A. v. William Kivett, et al.

The National Bank Act grants federally chartered banks both enumerated and incidental powers. Those powers include the enumerated authority to engage in real estate lending and the incidental power to administer associated escrow accounts used to pay real estate taxes, insurance, and similar fees. Twelve States have laws that purport to dictate interest rates that a national bank must pay on funds held in mortgage escrow accounts. In Cantero v. Bank of America, N.A., 602 U.S. 205 (2024), this Court held that whether such state-banking laws are preempted turns on a nuanced comparative analysis of those laws and similar laws whose preemption this Court has determined. Since then, the courts of appeals have divided on whether state interest-on-escrow laws are preempted under Cantero. The Second Circuit has concluded they are; the First and the Ninth Circuits disagree. The Office of the Comptroller of the Currency has adopted the Second Circuit’s view and emphasized the importance of a uniform resolution for the national banking system. The question presented is as follows: Whether the National Bank Act preempts state interest-on-escrow laws that, like California Civil Code § 2954.8(a), attempt to set the financial terms on which federally chartered banks may offer mortgage escrow accounts authorized by federal law.