Cantero v. Bank of America, N.A.

The U.S. Supreme Court reviewed whether a New York state law requiring national banks to pay a minimum 2% interest on mortgage escrow accounts is preempted by the National Bank Act. The plaintiffs, including Alex Cantero, sued Bank of America for failing to pay this interest. The Second Circuit Court of Appeals ruled in favor of Bank of America, holding that the state law was preempted because it would have a significant impact on the bank's powers. In a unanimous decision authored by Justice Brett Kavanaugh, the Supreme Court vacated the Second Circuit's ruling. It held that the lower court applied the wrong legal standard, failing to properly analyze the "significant interference" test required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The case was remanded for a new preemption analysis under the correct legal framework.

The U.S. Supreme Court unanimously vacated the judgment of the U.S. Court of Appeals for the 2nd Circuit and remanded the case for further proceedings. It ruled that the 2nd Circuit did not conduct the nuanced comparative analysis required by the Dodd-Frank Act's preemption standard to determine if the state law significantly interferes with a national bank's powers.

Whether the National Bank Act preempts a New York state law requiring national banks to pay interest on mortgage escrow accounts, and what legal standard courts must apply to determine federal preemption of state consumer financial laws under the Dodd-Frank Act.

This decision reinforces the strict legal standard for federal preemption of state financial regulations under the Dodd-Frank Act. By rejecting a broad preemption interpretation, the ruling ensures that national banks must justify preemption defenses on a case-by-case basis. It has significant implications for the balance of power between federal and state banking regulators and sets a precedent that protects state-level consumer financial protection laws unless they demonstrably and significantly interfere with a national bank's ability to exercise its federal powers.