Ninth Circuit Decision Underscores Preemption Limits, Spotlights State-Level Banking Risk

Key Takeaways:

• Ninth Circuit reaffirms that the National Bank Act does not preempt California's escrow-interest law: The court found no significant interference with national bank powers and again upheld the state's authority to require interest payments on mortgage escrow accounts.
• Cantero and Dodd-Frank continue to narrow the scope of federal preemption: The decision confirms that courts will demand a high bar for preemption and will give weight to congressional intent, preserving state-level consumer protections.
• National banks should reassess preemption strategies and bolster state-law compliance: Where preemption isn't viable, lenders should be prepared with strong, state-specific programs to reduce litigation risk and meet overlapping regulatory obligations.