OCC Finalizes Ruling That Federal Law Overrides State Interest-on-Escrow Rules

The Office of the Comptroller of the Currency (OCC) has finalized a determination that federal law overrides state rules requiring banks to pay interest on mortgage escrow accounts. The agency specifically targets laws in New York and ten other states that mandate this practice, concluding they conflict with the National Bank Act.

Why it matters: This ruling removes a compliance uncertainty for national banks and federal savings associations operating in the affected states. By clarifying that federal law controls, the OCC gives these lenders a uniform standard for escrow accounts, which the agency argues will reduce costs and keep mortgage lending consistent across state lines. The practical effect is limited to federally chartered institutions and does not change rules for state-chartered banks or credit unions.

Who it affects

• National banks and federal savings associations (they no longer need to comply with the targeted state interest-on-escrow laws)

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This determination was issued by the Office of the Comptroller of the Currency and published in the Federal Register; readers relying on its compliance guidance should review the full text and any accompanying effective dates before adjusting internal policies.

Agency: Treasury Department, Comptroller of the Currency
Source: Federal Register — read the official document