OCC rules state escrow interest laws preempted by federal authority
All OCC-regulated national banks and federal savings associations are bound by the rule effective June 18 2026.
The Office of the Comptroller of the Currency issued a final preemption determination concluding that federal law preempts state statutes that restrict OCC-regulated banks' ability to pay interest or assess fees on funds placed in real-estate escrow accounts. The determination is effective on June 18, 2026.
The rule is codified at 12 CFR Part 34, docket ID OCC-2025-0735, RIN 1557-AF45. It follows the agency's December 30, 2025 proposal and is coordinated with the concurrent Escrow Powers Rule that codifies national banks' and Federal savings associations' escrow account powers.
The OCC received approximately 20 comments from banks, trade associations, members of Congress, consumer groups, academics, State representatives, and individuals. Commenters who supported the proposal emphasized consistency with federal law, uniformity, and reduced operational complexity. The agency declined requests to extend the comment period, finding the original period sufficient under the Administrative Procedure Act.
The determination resolves a circuit split by affirming that New York's General Obligations Law §5-601 and substantively equivalent statutes in eleven other states are preempted. The agency notes that the same preemption analysis applies to Federal savings associations under the Home Owners' Loan Act.
By declaring these state interest-on-escrow laws preempted, the final rule provides nationwide clarity for banks' escrow account practices and removes state-level restrictions on interest payments and related fees.