Quick Answer: The Office of the Comptroller of the Currency (OCC) has proposed rules that would let national banks stop paying interest on mortgage escrow accounts—overriding consumer protection laws in 12 states. A bipartisan coalition of 23 state attorneys general is fighting back, calling it an illegal power grab that would cost homeowners hundreds of dollars a year.
If you have a mortgage, your bank is probably sitting on thousands of your dollars right now. In some states, they’re required to pay you interest on that money. A federal regulator wants to change that.
On December 30, 2025, the Office of the Comptroller of the Currency (OCC) published two proposed rules that would preempt state laws requiring national banks to pay minimum interest on mortgage escrow accounts. If finalized, banks could pocket the interest on your money—and you’d have no say in it.
On January 30, 2026, a bipartisan coalition of 23 state attorneys general and state banking regulators formally opposed the rules. This isn’t a partisan fight. It’s attorneys general from both parties saying: this is bad for homeowners.
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What’s an Escrow Account and Why Should You Care?
When you get a mortgage, your lender typically requires an escrow account. Each month, part of your payment goes into this account to cover property taxes and homeowners insurance. The bank holds the money and pays those bills on your behalf.
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Here’s the thing: that’s your money sitting in the bank’s account, sometimes thousands of dollars at any given time. If the bank doesn’t pay you interest on it, they’re effectively getting a free loan from you.
Key Insight: Escrow accounts are often mandatory for first-time homebuyers and families who can’t put down 20%. These aren’t people choosing to park cash with their bank—they’re required to. That makes this a fairness issue, not a market choice.
12 States Protect Your Right to Earn Interest
Over the past several decades, 12 states passed laws requiring lenders to pay minimum interest on escrow account balances:
- California (2% minimum)
- Connecticut
- Maine
- Maryland
- Massachusetts
- Minnesota
- New York (2% minimum)
- Oregon
- Rhode Island
- Utah
- Vermont
- Wisconsin
According to the Conference of State Bank Supervisors (CSBS), these 12 states account for roughly 30% of annual mortgage volume in the United States. These laws exist because state regulators saw banks inflating escrow balances to benefit from interest-free funding at homeowners’ expense.
What the OCC Wants to Do
The OCC published two proposals in the Federal Register:
- A new regulation that would give national banks full discretion over whether to pay interest on escrow accounts or charge fees on them.
- A preemption determination declaring that federal law overrides all 12 state laws requiring interest payments.
If both go through, national banks could stop paying interest on your escrow money tomorrow—even if your state law says otherwise.
Warning: You don’t get to choose who services your mortgage. If your loan gets transferred to a national bank, you could lose escrow interest protections through no fault of your own.
23 Attorneys General Say: Not So Fast
The coalition opposing these rules includes attorneys general from New York, Arizona, Colorado, Connecticut, Delaware, Hawai’i, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Oklahoma, Oregon, Rhode Island, Vermont, Virginia, Washington, the District of Columbia, and California—plus state banking regulators.
Their legal arguments are significant:
- Congress never interfered with state escrow interest mandates since 1864—over 160 years of precedent
- The Dodd-Frank Act specifically limits preemption to laws that “significantly interfere” with bank operations—paying 2% interest doesn’t meet that bar
- The Supreme Court already weighed in. In Cantero v. Bank of America (2024), the Court unanimously rejected blanket preemption and required case-by-case analysis
The OCC’s interest-on-escrow regulatory proposals would erode 50 years of state law designed to protect consumers. These proposals are not only bad law—but they are also horrible policy.— Conference of State Bank Supervisors
Carolyn Carter, senior attorney at the National Consumer Law Center, told Bloomberg Law: “This power grab by the OCC will allow national banks to require home buyers to make their tax and insurance payments into non-interest bearing accounts. It will allow national banks to effectively charge a hidden back-end fee by withholding interest on a homeowner’s money.”
Why This Matters for People in Debt
This isn’t just a banking regulation story. It’s a money-out-of-your-pocket story.
The Math: If your escrow account holds an average balance of $5,000 and your state requires 2% annual interest, that’s $100 a year the bank owes you. Multiply that across 30% of U.S. mortgages, and we’re talking about billions of dollars shifting from homeowners to bank balance sheets.
When you’re already stretched thin making mortgage payments, every dollar matters. And the people hit hardest are the ones who can least afford it—first-time buyers and lower-income families who are required to have escrow accounts because they couldn’t put 20% down.
State regulators described the OCC’s proposals as helping “national banks pick the pocket of homeowners.”
What You Can Do
- Know your state’s law. If you live in one of the 12 states listed above, you currently have escrow interest protections
- Check your mortgage statements. Are you actually receiving interest on your escrow balance? If not, you may already be owed money
- Pay attention to who services your loan. National banks (like Bank of America, Chase, Wells Fargo) would be affected by this rule change. State-chartered banks and nonbank servicers would still have to follow state law
- Contact your state attorney general if you believe your escrow interest rights are being violated
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Key Takeaways
- The OCC wants to let national banks stop paying interest on your mortgage escrow money—overriding 12 state consumer protection laws
- A bipartisan coalition of 23 attorneys general is fighting the proposals as an illegal power grab
- The Supreme Court already rejected blanket preemption in Cantero v. Bank of America (2024)
- About 30% of U.S. mortgages are in states with escrow interest protections—first-time and lower-income buyers are most at risk
- State regulators call it “picking the pocket of homeowners”
Frequently Asked Questions
What is a mortgage escrow account?
An escrow account is set up by your mortgage lender to hold money for property taxes and homeowners insurance. Part of your monthly mortgage payment goes into this account, and the lender pays those bills on your behalf. Many borrowers—especially first-time buyers—are required to have one.
Does my bank have to pay interest on my escrow account?
It depends on your state. Currently, 12 states require lenders to pay minimum interest on mortgage escrow balances. Federal law does not require interest payments, which is why the OCC’s proposed rules could eliminate these state-level protections for customers of national banks.
How would the OCC’s proposed rules affect me?
If you live in one of the 12 affected states and your mortgage is serviced by a national bank, the bank could stop paying interest on your escrow balance. You don’t get to choose your mortgage servicer—loans are frequently sold and transferred—so you could lose this protection through no action of your own.
What did the Supreme Court decide in Cantero v. Bank of America?
In May 2024, the Supreme Court unanimously ruled that courts must evaluate state banking laws on a case-by-case basis to determine if they’re preempted by federal law. The Court rejected the idea that federal banking law automatically overrides all state consumer protection requirements—which is essentially what the OCC is now trying to do through regulation.
Can I avoid this by refinancing with a different bank?
Even if you refinance with a state-chartered bank, your loan could later be sold to a national bank servicer. The real protection is at the state and federal level—which is why 23 attorneys general are fighting to keep these consumer protections in place.
(Source: California Department of Justice | OCC News Release | Bloomberg Law)
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