What's Happening?
The Office of the Comptroller of the Currency (OCC) filed a reply brief on November 2, 2026, supporting its motion to dismiss or transfer to the District of Columbia a lawsuit initiated by Oregon and nine other states. This lawsuit challenges two OCC rules
issued on May 15, 2026, concerning the preemption of state interest-on-mortgage escrow laws. The OCC's brief reiterates its initial arguments, particularly targeting what it describes as the states' attempt to establish standing and venue by consolidating their efforts in Oregon to circumvent unfavorable Second Circuit precedent. The litigation, filed in the District of Oregon (Oregon v. Office of the Comptroller of the Currency, No. 3:26-cv-01672-SI), specifically contests the Real Estate Lending Escrow Accounts rule (the Powers Rule) and the Preemption Determination: State Interest-on-Mortgage Escrow Laws. The states argue that the OCC overstepped its authority under the National Bank Act and failed to adhere to restrictions imposed by the Dodd-Frank Act on OCC preemption determinations.
Why It's Important?
This legal battle is significant for the future of state interest-on-mortgage escrow laws and the scope of the OCC's authority to preempt such laws under the National Bank Act. The outcome will determine whether states can enforce their own mortgage escrow regulations or if federal preemption will prevail, potentially impacting consumers and financial institutions nationwide. The OCC's argument that the states lack standing due to an absence of concrete injury—as no national bank has allegedly refused to comply with state laws—could set a precedent for future challenges to federal regulatory actions. Furthermore, the dispute over venue, with the OCC pushing for a transfer to Washington, D.C., highlights a broader issue of forum shopping and could influence where multi-state lawsuits against federal agencies are litigated, affecting the accessibility and fairness of judicial review for states.
What's Next?
The OCC's reply brief concludes the briefing phase for its motion to dismiss or transfer. The court is expected to rule on these motions before November 20, 2026. A separate dispute regarding the states' request for a partial stay of proceedings, pending Supreme Court consideration of related interest-on-mortgage escrow cases, remains unresolved. The OCC is scheduled to file its reply brief on this matter by November 6, 2026. Key issues to watch include whether the court accepts the OCC's argument that the states lack standing and whether the court agrees to transfer the case to the District of Columbia, especially given the OCC's assertion that some plaintiff states are attempting to avoid the implications of the Second Circuit's decision in Cantero II. The court's decisions on these preliminary matters will significantly influence the trajectory and potential outcome of this litigation.
Beyond the Headlines
The legal arguments presented by the OCC, particularly its reliance on the distinction between an abstract disagreement over state law enforceability and an actual inability to enforce it due to conflicting federal requirements, delve into fundamental principles of federalism and judicial review. The OCC's use of President Trump v. California and President Trump v. CASA, Inc. in its arguments underscores the evolving legal landscape concerning standing, ripeness, and the availability of universal injunctions. This case could clarify the boundaries of federal preemption in financial regulation, potentially shifting power dynamics between federal agencies and state governments. The outcome may also influence how states strategically form coalitions and select venues for challenging federal rules, impacting the effectiveness of state-led legal actions against federal regulatory bodies.
