Banking and Finance Law Daily Wrap Up, PREEMPTION—CSBS, state groups seek extended comment period on escrow preemption proposal, (Jan 16, 2026)

By Shashi Kant, BALLB, LLM.

State regulators say 30 days is insufficient, citing timing, scope, and implications of the OCC’s first application of the 2010 preemption standard.

The Conference of State Bank Supervisors, joined by the National Conference of State Legislatures and the American Association of Residential Mortgage Regulators, have sent a letter to the Office of the Comptroller of the Currency requesting to extend the comment period on its proposed determination that federal law preempts certain state interest-on-escrow requirements. The groups requested that the OCC extend the current 30-day comment period by an additional 60 days, for a total of 90 days from publication of the proposal in the Federal Register. According to the letter, the extension would allow more comprehensive engagement by affected stakeholders and better inform the OCC’s analysis of its statutory obligations when issuing a preemption determination. According to the Federal Register notice, comments on the OCC’s proposed preemption determination are due Jan. 29, 2026, unless the agency grants the extension requested by the state groups.

Scope and significance cited by state groups. According to the letter, the OCC’s proposal would preempt consumer protection laws that have been in place for decades in twelve states and would also preclude other states from applying similar policies to mortgage servicers operating within their jurisdictions. The signatories stated that the proposal would have implications for mortgage borrowers, the mortgage servicing industry, and the authority of states to protect residents from abusive or deceptive servicing practices. The letter states that questions concerning when and how the OCC may preempt state consumer protection laws applicable to national banks have been the subject of extensive debate and were addressed by Congress in 2010. According to the signatories, the proposal represents the first application of the preemption standard and process enacted by Congress at that time and therefore carries implications for the boundaries of National Bank Act preemption more generally.

Timing concerns. The state groups stated that a 30-day comment period is insufficient given the immediate impact of the proposed preemption determination and its broader implications for future preemption analyses. According to the letter, the timing of the comment window, which includes end-of-year holidays and the beginning of many states’ legislative sessions, further limits the ability of affected parties to participate meaningfully in the rulemaking process. The letter states that extending the comment period would allow state regulators, legislators, industry participants, and other stakeholders to review the proposal, assess its implications, and provide more considered feedback to the OCC. The signatories stated that additional time would support more informed submissions addressing the OCC’s statutory obligations when preempting state consumer financial laws.

OCC’s proposal. Earlier this month the OCC issued a notice of proposed rulemaking proposing a determination that federal law preempts state laws that eliminate national banks’ and federal savings associations’ flexibility to decide whether and to what extent to pay interest or other compensation on funds held in real estate escrow accounts, or to assess fees in connection with those accounts. The OCC stated that the proposed preemption would apply to a New York interest-on-escrow law and laws with substantively equivalent terms in other states. In a related proposal, the OCC also proposed to amend its regulations to codify national banks’ and federal savings associations’ authority to establish and maintain real estate escrow accounts and to clarify that decisions regarding compensation and fees are business judgments made by individual institutions, according to the agency. The OCC stated that these proposals are intended to provide clarity regarding banks’ escrow practices. The OCC stated in the notice that litigation over state interest-on-escrow laws has produced conflicting court decisions and that a preemption determination would address uncertainty regarding the interaction between federal banking law and state requirements (Banking and Finance Law Daily, Jan. 2, 2026).

Companies: Conference of State Bank Supervisors; National Conference of State Legislatures; American Association of Residential Mortgage Regulators

RegulatoryActivity: BankingOperations InterestUsury Loans Mortgages Preemption