Lenders often require borrowers to keep money in a mortgage escrow account, and those funds are used to pay taxes, mortgage insurance, and other costs throughout the year.  At least 12 states require lenders to pay the borrower interest on the money held in these escrow accounts.  And for more than a decade, certain national banks have challenged the applicability of those state laws to them, arguing the laws are preempted by the National Bank Act because they would significantly interfere with the exercise of a federally granted banking power.[1]  

These cases have resulted in a trip to the Supreme Court.  In Cantero v. Bank of America, the Supreme Court explained that the test for preemption under the National Bank Act requires courts to “make a practical assessment of the nature and degree of the interference caused by a state law,” and courts should do so by engaging in a “nuanced comparative analysis” that compares the interference caused by previous state laws that were challenged as preempted before the Supreme Court to the law at issue.[2]  602 U.S. 205, 219–21 (2024). 

Lower courts are only now beginning to apply the Cantero court’s approach to preemption under the National Bank Act.  In the first appellate court decision to address National Bank Act preemption post-Cantero, the First Circuit has suggested that demonstrating the “significant interference” required for National Bank Act preemption will be exceedingly difficult on a motion to dismiss.  Another decision, Kivett v. Flagstar Bank, FSB, 2025 WL 2800150 (9th Cir. Oct. 2, 2025), will be addressed in a forthcoming post.

In Conti v. Citizens Bank, N.A., 2025 WL 2693215 (1st Cir. Sept. 22, 2025), a class action plaintiff challenged Citizens Bank’s failure to pay interest under Rhode Island’s interest-on-escrow law.  After Citizens Bank successfully asserted preemption in the district court, Conti appealed, and while his appeal was pending, the Supreme Court decided Cantero. In the wake of Cantero, the First Circuit reversed the lower court’s decision in Conti, finding that the Rhode Island law did not significantly interfere with the bank’s power to engage in mortgage lending and offer mortgage escrow accounts. 

In reaching this conclusion, the First Circuit first compared the Rhode Island law to the laws at issue in the seven main Supreme Court NBA preemption cases,[3] but found most to be “generally inapposite” because those cases had either an “inevitable encroachment on federal-banking power” or “an express conflict between federal and state law,” both of which the First Circuit found lacking here. Id. at *7–8. The First Circuit thus focused on First National Bank of San Jose, Anderson, and Franklin, which the court described as cases dealing with “state laws that were banking-specific and that did not expressly conflict with federal laws.”  Id. at *10. According to the First Circuit, the lesson from those three cases is that there is no significant interference warranting preemption unless the challenged statute “conflicts with the overall scheme of federal-banking law.”  Id. at *11.

Here, the First Circuit held that Citizens Bank could not make that showing because Congress has mandated compliance with state interest on escrow laws for certain mortgages, suggesting that the federal banking scheme was not automatically incompatible with these laws.  Id.  And the First Circuit also pointed out additional reasons why the National Bank Act did not preempt Rhode Island’s law. For starters, the bank had not “developed any substantial argument about the practical effects” from the enforcement of the Rhode Island law.  Id. at *12.  Additionally, the First Circuit rejected the bank’s argument that significant interference could be demonstrated where varying state laws on the same topic would force banks to “comply with a patchwork of varying and conflicting state regulations,” finding that this argument sounded in “field preemption” and was “not convincing.”  Id. at *13–14.

Overall, a bank facing a Conti-like approach will encounter difficulty establishing preemption under the National Bank Act at the motion to dismiss stage. First, Conti’s “nuanced comparative analysis” focused on the law at issue in the prior National Bank Act cases, not the nature and degree of interference caused by those laws, which could make it easier for future courts to find helpful prior NBA casesirrelevant where there is no direct conflict between the state law and the federal banking power.[4] Second, Conti’s focus on the “overall scheme of federal-banking law” could make it easier for plaintiffs to argue that Congress did not want to preempt the challenged law. Third,cases following Conti may demand actual evidence of practical impact on banking powers, which will difficult, if not impossible, to develop at the motion-to-dismiss stage. Finally, Conti’s rejection of the “patchwork” argument may make other courts unwilling to consider the effect that trying to comply with many and often varying state laws has on national banks, an argument that has historically been valuable in making preemption arguments.

[1] For a review of the history of the National Bank Act and how the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act altered the preemption standard, see Conti v. Citizens Bank, N.A., 2025 WL 2693215, at *2–4 (1st Cir. Sept. 22, 2025).

[2] Not all courts agree that Cantero requires this comparative analysis.  See Kivett v. Flagstar Bank, FSB, 2025 WL 2800150 (9th Cir. Oct. 2, 2025) (holding that prior Ninth Circuit decision addressing preemption of similar law was not inconsistent with Cantero because “nothing in Cantero suggests that the nuanced comparative analysis . . . is the sole method for determining preemption” (cleaned up)).

[3] Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25 (1996); Fidelity Fed. Savings & Loan Ass’n v. De la Cuesta, 458 U.S. 141 (1982); Franklin Nat. Bank of Franklin Square v. New York, 347 U.S. 373 (1954); Anderson Nat. Bank v. Luckett, 321 U.S. 233 (1944); First Nat. Bank of San Jose v. Cal., 262 U.S. 366 (1923); McClellan v. Chipman, 164 U.S. 347 (1896); and Nat. Bank v. Commonwealth, 76 U.S. (9 Wall.) 353 (1869).

[4] The relevance and applicability of this precedent to whether the National Bank Act preempts interest on escrow laws is already subject to disagreement.  See Kivett, 2025 WL 2800150, at *15­–17 (Nelson, J., dissenting) (finding that prior NBA preemption cases counsel in favor of finding that California’s interest on escrow law is preempted by the NBA).