Federal Banking Laws Should Override State Laws, Supreme Court Hears

The Supreme Court considered on Feb. 27 whether federal law overrides a New York state law that compels banks to pay interest on mortgage escrow accounts. The justices heard oral arguments in the case known as Cantero v. Bank of America. Bank of America is challenging New York’s escrow interest law. The state statute provides that banks must pay at least 2 percent interest on accounts that contain the extra money that borrowers pay for insurance and property taxes. Thirteen states have similar pro-borrower laws. Bank of America argues that such state laws are preempted by federal law. The Civil War-era National Bank Act establishes a system of federally chartered national banks whose banking powers come exclusively from federal law and are extensively regulated by federal banking authorities, primarily the Office of the Comptroller of the Currency (OCC), Bank of America stated in a brief....