Ten states challenging the Office of the Comptroller of the Currency's interest-on-escrow rules asked a federal judge on October 23 to reject the agency's request to pause the case while the Supreme Court considers related petitions. The filing argues that the high court proceedings will not resolve the central questions in their suit, that a stay of unknown length would harm both the states and mortgage borrowers, and that the agency has not shown the hardship needed to justify the delay.
The case is State of Oregon et al. v. Office of the Comptroller of the Currency et al., No. 3:26-cv-01672-SI, in the U.S. District Court for the District of Oregon. The ten plaintiffs are California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island and Vermont. Each has a law requiring interest to be paid on mortgage escrow balances, and some also restrict service charges on those accounts.
At issue are two final rules the OCC published on May 19 and made effective June 18. The first, at 91 Fed. Reg. 29340, codifies national banks' authority to set the terms of real estate escrow accounts, including whether to pay interest or charge fees. The second, at 91 Fed. Reg. 29350, concludes that federal law preempts state laws restricting that flexibility. The states sued in August under the Administrative Procedure Act, and the latest filing is their opposition to the agency's motion to put the merits on hold.
The request is for time, and time is the injury
The OCC moved for a partial stay on October 9. It wants the court to pause everything except the agency's own motion to dismiss or transfer, pending resolution of three Supreme Court cases about state interest-on-escrow laws.
The states describe that request as a bet on a series of events that may never happen. The Supreme Court has not granted review in any of the three cases. It could deny the petitions, or grant one and decide it on grounds that leave the administrative questions untouched. A stay built on that sequence has no fixed endpoint, and the states argue that an indefinite pause is the harm, not a neutral waiting period.
Their filing invokes the standard courts use for stays, drawn from Landis v. North American Co. in 1936 and applied in the Ninth Circuit. A court weighs whether a stay would simplify the issues, the damage it would cause, and the hardship the moving party would suffer without it. The states argue that the OCC fails the first and third parts and that the second weighs heavily against a pause.
Two rules and one question about who decides
The Escrow Powers Rule is short in substance. National banks and federal savings associations have long held escrow accounts for borrowers, collecting money for property taxes and insurance and paying it out when bills come due. The rule states that banks may decide the terms of those accounts, including whether to pay any compensation on the balances and whether to charge fees.
The Preemption Determination goes further. It concludes that federal law displaces state laws that limit that flexibility. The OCC framed the determination as clarity for banks and other stakeholders, and its own summary of the rule acknowledges that it is likely to reduce expenditures at supervised institutions because they may elect not to pay interest on escrow funds.
The states' challenge rests on the limits Congress placed on the agency's preemption authority. Section 25b of Title 12, enacted in Dodd-Frank, requires the OCC to make preemption determinations under the standard set by Barnett Bank of Marion County v. Nelson in 1996. It also imposes procedural duties, including case-specific findings supported by substantial evidence, and it limits judicial deference to the agency's conclusions.
The states also lean on Cantero v. Bank of America in 2024, when the Supreme Court rejected a categorical approach to National Bank Act preemption and sent the question back for the proper analysis. Their argument is that the OCC did the opposite of what Cantero requires: it announced a general rule about a category of state laws rather than making the kind of specific findings the statute demands.
The pairing of the two rules matters. The Escrow Powers Rule defines what banks may do. The Preemption Determination decides that states cannot say otherwise. A court could uphold the first and still set aside the second if the agency did not follow Section 25b's process, which is why the states' complaint challenges both together. The rules were written to work as a set, and they rise or fall on the same administrative record.
The Supreme Court cases are not this case
The three petitions before the Supreme Court arise from private lawsuits. Borrowers sued banks over state interest-on-escrow laws, and the banks raised federal preemption as a defense. The laws at issue are those of Rhode Island, New York and California.
The Oregon case is a different kind of proceeding. The states are not defending their laws against a bank in a contract dispute. They are asking a court to set aside two agency rules as beyond the OCC's authority, procedurally defective and arbitrary and capricious. Whether a particular state law is preempted, the states argue, does not answer whether the OCC followed the process Congress required when it issued the determination.
On October 5 the Supreme Court invited the Solicitor General to express the views of the United States on the three petitions. It did not grant review, and the orders set no deadline for the government's submission. The states note that the next steps depend on the Solicitor General, then on the Court's certiorari decision, then on the merits, which makes the stay's duration a matter of speculation.
The three proceedings concern only the laws of Rhode Island, New York and California. The other seven plaintiff states have materially different statutes, so even a ruling that the three laws are preempted would leave the Oregon court to decide how the OCC's rules apply to the remaining states.
The calendar gives the court three decision points
The district court has set a schedule that turns several questions at once. The OCC's motion to dismiss or transfer, filed October 5, challenges standing, venue and the sufficiency of the states' claims. The states opposed it on October 19. Their opposition to the stay motion followed on October 23.
Under the court's October framework, the OCC must file reply briefs on November 2 for the dismissal or transfer motion and on November 6 for the stay motion. The court anticipates resolving both by November 20. If the motions are denied, production of the administrative record is due December 9, and the parties would then proceed to cross-motions for summary judgment.
The states object to the shape of the OCC's request as well as its timing. The agency proposed to pause the merits while allowing its own motion to dismiss to move forward, an arrangement the states describe as one-sided: the agency could litigate its preferred threshold defenses while the states waited for a decision on their affirmative claims. They argue that preference is not the kind of hardship the stay standard recognizes.
A paused case still moves money
Escrow accounts are not small change in a household budget. A servicer collects monthly amounts for taxes and insurance and holds them until the bills arrive, so the balance can run to thousands of dollars. Interest-on-escrow laws require the servicer to pay the borrower for the use of that money. Without those laws, the bank keeps the benefit of the float.
The rules are already in effect, and the states argue that a stay would let national banks stop making payments their laws require while the litigation sits. They point to the OCC's own statement that the preemption determination is likely to reduce expenditures at supervised institutions, which they read as an admission of the mechanism.
Consumer harm is not the basis on which the states establish their own standing, and they say so. They argue it is still relevant to the stay analysis, because courts weigh the damage a pause would cause to other parties and nonparties. A borrower in one of the ten states could see interest stop on an account while a case about the rule's validity waits on a cert petition.
The amounts per household are modest. The totals are not. Escrow balances across a large bank's mortgage book are substantial, and an interest rate applied to them is a recurring cost that moves from borrowers to the institution holding the funds.
The ruling will not end the argument
Whatever the district court decides on the stay, it will not settle whether the OCC's rules are lawful. A denial moves the case to the administrative record and summary judgment, with the merits in front of a district judge in Oregon. A grant pushes the case behind the Solicitor General's review and the Supreme Court's certiorari calendar, which could take a year or more.
The underlying question is larger than escrow interest. A preemption determination of this kind can displace a category of state consumer laws in one stroke, and the states are testing whether Congress's post-crisis limits on that authority have teeth.
A ruling for the states would force the agency back to case-specific findings for this rule, and possibly for others written in the same categorical style. A ruling for the OCC would confirm that a general determination can displace a category of state consumer laws without the findings Section 25b describes. Either outcome will be appealed, and the Supreme Court may get the last word after all, on a schedule nobody in the Oregon case controls.
For now the practical question is narrower. The rules took effect in June. The motion to dismiss and the motion to stay are fully briefed within two weeks. The court has said it expects to resolve both by November 20. Until then, the interest payments at the center of the case remain governed by a rule that ten states say should never have been issued.
Primary sources
- National Law Review, analysis of the states' October 23 opposition to the OCC's partial stay motion in State of Oregon et al. v. Office of the Comptroller of the Currency et al., October 2026. natlawreview.com
- Office of the Comptroller of the Currency, Real Estate Lending Escrow Accounts, final rule, 91 Fed. Reg. 29340, May 19, 2026. federalregister.gov
- Office of the Comptroller of the Currency, Preemption Determination: State Interest-on-Escrow Laws, 91 Fed. Reg. 29350, May 19, 2026. federalregister.gov