Attorney General Bonta Joins Bipartisan Amicus Brief to U.S. Supreme Court Defending States’ Rights to Enforce State Consumer Financial Protection Laws

December 18, 2023 – California Attorney General Bonta joined a bipartisan multistate coalition of attorneys general in an amicus brief to the U.S. Supreme Court defending states’ rights to enforce state consumer financial protection laws against both state and national banks. In the brief filed in Cantero v. Bank of America, the coalition urges the Supreme Court to overturn a Second Circuit Court of Appeals decision holding that the National Bank Act preempts a New York state law that requires mortgage lenders to pay a 2% minimum interest rate on funds held in mortgage escrow accounts. At least 13 other states, including California, have similar laws in place to protect consumers. The state coalition has a strong interest in the enforcement of their banking-related laws against state and national banks alike for the benefit of consumers. The Second Circuit’s broad preempt­ion standard unduly undermines states’ important role in consumer protection.

“As the 2008 financial crisis made clear, we must put consumer financial protection at the forefront, not the interests of Big Banks,” said Attorney General Bonta. “States play a crucial role in consumer financial protection. Alongside a bipartisan coalition of attorneys general, I’m standing up for states’ rights to enforce state consumer financial protection laws. California will continue to do all it can to protect consumers from financial exploitation and abusive lending practices.”

California law requires financial institutions, including banks, to pay at least 2% annual interest on funds deposited in mortgage escrow accounts, which are used by lenders to ensure timely payment of property taxes and insurance. These state minimum escrow interest laws play an important part in protecting consumers. Before the escrow interest laws were enacted, some lenders would collect significantly more in escrow than was needed to timely pay taxes and insurance, and would not pay any interest to the borrower, giving the lender essentially an interest-free loan at the borrower’s expense. The minimum escrow interest laws were intended to reduce the incentive for borrowers to collect excessive funds in escrow. If such laws were preempted, consumers would be again subject to the abuse of excessive escrow deposits, which can be a significant hardship to borrowers with modest incomes. Furthermore, preempting minimum escrow interest laws as applied to national banks would put national banks at a competitive advantage over state banks, which would still be subject to state minimum escrow interest laws.

In the brief, the coalition argues that the Second Circuit’s broad preemption decision should be overturned as it:

  • Unduly impairs states’ sovereign interest in enforcing their banking-related laws against state and national banks alike for the benefit of consumers.
  • Conflicts with longstanding Supreme Court precedent that affirms states’ sovereign interest in enforcing their own banking-related laws against national banks, as long as those laws do not prevent or significantly interfere with the exercise of national banks’ powers.

In filing the brief, Attorney General Bonta joined the attorneys general of New York, Iowa, Alaska, Arizona, Colorado, Connecticut, Delaware, Georgia, Hawai’i, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, Nevada, New Jersey, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont, Washington, and Wyoming, and the District of Columba.

By the California Attorney General’s Office
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