Cantero v. Bank of America, N. A.
602 U.S. 205
SCOTUS2024Background
- The United States has a dual banking system, with national banks subject mainly to federal regulation and state banks to state oversight.
- The National Bank Act grants national banks the power to administer home mortgage loans and operate escrow accounts; these are also regulated by the federal RESPA statute.
- New York state law requires banks to pay at least 2% annual interest on mortgage escrow account balances, while federal law does not.
- Plaintiffs Cantero, Hymes, and Harwayne-Gidansky took out mortgages with Bank of America (a national bank) in New York and were not paid interest on their escrow accounts, which they claimed violated New York law.
- The District Court sided with plaintiffs, finding no federal preemption, but the Second Circuit reversed, holding that New York's law was preempted by federal law.
- The U.S. Supreme Court granted certiorari to clarify the preemption standard under the National Bank Act and Dodd-Frank.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the National Bank Act preempts New York’s law requiring interest payments on mortgage escrow accounts for national banks | New York law applies—does not interfere significantly with national bank powers; only federal law, not state law, governs preemption | New York’s law exerts control over a federally granted banking power—any such state law should be preempted | Second Circuit used wrong preemption standard; must apply Dodd-Frank/Barnett Bank “significant interference” standard in a nuanced way |
Key Cases Cited
- Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996) (establishes the "significantly interferes" standard for preemption of state laws affecting national banks)
- Franklin National Bank of Franklin Square v. New York, 347 U.S. 373 (1954) (state law preempted where it interfered with national banks’ ability to use specific federally authorized terminology)
- Anderson National Bank v. Luckett, 321 U.S. 233 (1944) (state abandoned property law not preempted as it did not interfere with national bank powers)
- First National Bank of San Jose v. California, 262 U.S. 366 (1923) (state law preempted where it functionally discouraged depositors)
- Fidelity Federal Savings & Loan Association v. De la Cuesta, 458 U.S. 141 (1982) (state law preempted where it limited federally granted flexibility in loan contracts)
- National Bank v. Commonwealth, 74 U.S. (7 Wall.) 353 (1869) (state tax law not preempted; national banks subject to general laws that do not impair their efficiency)
- McClellan v. Chipman, 164 U.S. 347 (1896) (generally applicable contract law not preempted as applied to national banks)