Golden State Today

California Attorney General Rob Bonta issued a statement today following the U.S. Supreme Court's decision to overturn a Second Circuit Court of Appeals ruling in Cantero v. Bank of America. The Supreme Court determined that the lower court did not apply the correct standard for assessing whether a New York state law mandating mortgage lenders to pay a 2% minimum interest rate on funds held in mortgage escrow accounts is preempted by the National Bank Act as it pertains to national banks. This ruling permits states to enforce consumer financial protection laws against both state and national banks, provided these laws do not significantly interfere with national banks' operations.

“The 2008 financial crisis absolutely blindsided families and homeowners who thought they were in a safe and stable place. Today, the Supreme Court has rejected a sweeping rule that would have hindered the ability of states to protect consumers from financial exploitation and abusive lending,” said Attorney General Bonta. “I celebrate today’s news and remain committed to guarding and enforcing essential consumer protection laws, today and every day.”

The U.S. Supreme Court noted that the Court of Appeals’ categorical test was improper and contrary to the Dodd-Frank Act, which would preempt nearly all state laws regulating national banks. Since the Court of Appeals failed to evaluate the New York law under the appropriate standard, the Supreme Court remanded it back to lower courts for further evaluation regarding its preemption by federal law.

Similar to New York's law in Cantero v. Bank of America, California mandates that financial institutions pay at least 2% annual interest on funds deposited in mortgage escrow accounts. These funds are used by lenders for timely payment of property taxes and insurance. State minimum escrow interest laws serve as an important consumer protection measure, ensuring fair treatment for borrowers and reducing incentives for lenders to collect excessive escrow funds without paying interest.

In December 2023, Attorney General Bonta joined a bipartisan coalition of attorneys general in submitting an amicus brief to the U.S. Supreme Court defending states' rights to enforce state consumer financial protections.

A copy of Attorney General Bonta's previously filed amicus brief is available here. A copy of the U.S. Supreme Court’s decision is available here.