The US Supreme Court has recently decided to examine whether or not states have the authority to mandate banks to pay interest on mortgage escrow accounts. Bloomberg Law reported that this decision was made in response to a case involving Bank of America.
The lawsuit in question challenges New York’s escrow interest law, a law ostensibly designed to safeguard borrowers, which is also present in twelve other states including California. As per New York’s law, banks must pay a minimum interest of 2% on escrow accounts. These accounts typically hold surplus money that borrowers pay to cover insurance and property taxes.
The justices of the Supreme Court now face the task of determining whether such laws are applicable to national banks or whether they are superseded by the National Bank Act. The impact of this case will likely extend far beyond New York, involving potential interpretations of the preemption doctrine and its effect on nationwide banking laws.