WASHINGTON — The Biden administration has said that the Supreme Court shouldn't hear two related cases that deal with the preemption of state laws on the payment of interest on mortgage escrow accounts.
The solicitor general said in a
The brief challenged the decisions made by lower courts — one by the 9th Circuit in Flagstar Bank FSB v. Kivett, and another by a 2nd Circuit panel in Cantero v. Bank of America, N.A. — but said that the issue shouldn't be decided by the Supreme Court.
The two decisions conflicted, which is why it might be considered at the highest level. The 9th Circuit ruled that California law was not preempted and the 2nd Circuit ruled that the National Bank Act does preempt a New York law.
But that isn't enough of a reason for the Supreme Court to weigh in on the matter, according to the Biden administration brief. While the two decisions didn't match up, the discrepancy is "shallow," the solicitor general says in the brief.
"Neither the Second nor the Ninth Circuit applied the correct preemption standard to the interest-on-escrow laws at issue," according to the brief. "The Court therefore should allow additional lower courts to consider the question presented and engage with the arguments raised in this brief."
And while generally, the issue of preemption under the National Bank Act is a big topic, the brief notes that only 13 states have enacted interest-on-escrow laws, which means that the specific question of interest on escrow payments might not be the ideal issue for the Supreme Court to tackle state preemption of the National Banking Act as a whole.
That said, should the Supreme Court choose just one of these cases to take up, the solicitor general recommends the Flagstar case. Despite concerns that Flagstar only recently became a national bank instead of a federal savings bank, the brief says that Dodd-Frank made the preemption standards the same for the two types of institutions.
Notably, the solicitor general also argues against an
At the time, the OCC called the issue "a matter of foundational consequence to the OCC and to the federal banking system."
According to the solicitor general, the federal government takes a more narrow interpretation, and the OCC advocated for "a different and broader view" of the National Banking Act than the government is laying out in its most recent brief to the Supreme Court.
The current solicitor general brief outlines an interpretation of the issues that "better reflects the text, structure, and history of the statute," the solicitor general said.
