On May 30, the Supreme Court issued its opinion in Cantero v. Bank of America, N.A., in which the Court was set to decide whether national banks must comply with state interest-on-escrow laws (and by extension, certain other state laws). Rather than providing a clear preemption standard, the Court sent the issue back to the Second Circuit with instructions to conduct a “nuanced comparative analysis” of prior opinions to determine how those laws stack up in terms of interference with banks’ powers.

The Cantero case relates specifically to whether Bank of America, a national bank, must comply with New York law requiring a person maintaining an escrow account to credit the account with interest at a rate of 2%. The Bank argued that the National Bank Act preempts such state law requirements, and the Second Circuit agreed. The Second Circuit held that the preemption determination does not turn on how much a state law impacts a national bank, but rather whether it purports to “control” the bank’s exercise of its powers. In the court of appeals’ view, it is the nature of an invasion into a national bank’s enumerated or incidental operations—not the magnitude of its effects—that determines whether a state law purports to exercise control over a federally granted banking power and is thus preempted. The Second Circuit essentially held that preemption is relatively broad – that the enumerated and incidental powers of national banks must not be hampered by state laws.

On the other hand, the Ninth Circuit has held that Bank of America, and of course other national banks, must comply with California’s statute requiring the payment of interest on escrow funds – that the state statute is not preempted. In 2018, the Ninth Circuit held (in Lusnak v. Bank of America) that the state law does not “prevent or significantly interfere with [the bank’s] exercise of its powers.” The Ninth Circuit focused on the magnitude of the state law’s effects, essentially holding that preemption is relatively narrow.

In resolving this conflict between the circuit courts, Justice Kavanaugh (writing for a unanimous Court) reinforced the Dodd-Frank Act and its incorporation of the Court’s opinion in Barnett Bank of Marion County, N.A. v. Nelson. The Act provides that a state consumer financial law is preempted only if the law discriminates against national banks, or prevents or significantly interferes with the exercise by a national bank of its powers, and expressly ties that standard to the opinion in Barnett Bank.

The Court’s Cantero opinion does not cite the rest of that statute, which provides that any such preemption determination may be made “by a court, or by regulation or order of the Comptroller of the Currency [OCC] on a case-by-case basis, in accordance with applicable law.” The OCC’s regulations provide that a national bank may make real estate loans without regard to state law limitations concerning, among other issues, “escrow accounts.” While those regulations predate the Dodd-Frank Act, the Court does not address whether Congress intended, by expressly mentioning those regulations, to incorporate that preemption into the Barnett Bank analysis. The Court notes only that the Second Circuit did not address the regulations’ significance, “if any.”

While that standard – prevent or significantly interfere with bank powers – seems open to interpretation (and in fact has led to different interpretations, as evidenced by the split between the Second and Ninth Circuits), Justice Kavanaugh makes the analysis seem crystal clear. One must simply consider the interference with bank powers caused by the state laws analyzed in Barnett Bank and the Supreme Court precedents it discusses (some of which date back to 1870), and determine whether the nature and degree of interference caused by the state law at issue is “more akin” to those that were deemed preempted or to those that were deemed not preempted. The opinion also urges us to use common sense. In the end, the Court remanded the case to the Second Circuit to undertake that analysis.

One could expect that upon undertaking that analysis as the Court instructs, the Second Circuit may come to the same substantive conclusion – that New York’s interest-on-escrow requirement is preempted for national banks. One could also guess that the Ninth Circuit may, if it were asked or required to undertake its analysis anew, come to its same conclusion that California’s similar interest-on-escrow requirement is not preempted. Inconsistent preemption results for substantially similar laws in different states cuts against the rationale for preempting certain state laws for national banks in the first place.

Looking beyond state laws on mortgage escrow accounts, the Court’s Cantero opinion will appear to require nuanced comparisons of the impact of all sorts of state laws with age-old precedents, and expert testimony on the degree and magnitude of the laws’ effects on banks’ exercise of enumerated and incidental powers. Unfortunately, the result of the Court’s opinion may be less straight-forward than Justice Kavanaugh makes it sound. In a sense, we are back where we started, without bright lines for determining whether national banks must comply with an endless assortment of state laws.

A recipe for continued litigation – and we still do not know whether national banks must pay interest on mortgage escrow accounts in New York.

For additional information on the Court’s decision, see Mayer Brown’s Supreme Court & Appellate Practice page.

On May 22, the Consumer Financial Protection Bureau (“CFPB”) issued an interpretive rule purportedly clarifying the breadth of the term “credit card” for Truth in Lending Act (“TILA”)/Regulation Z purposes in the buy-now/pay-later (“BNPL”) context (the “Interpretive Rule”). The clarification asserts that “digital user accounts” that permit consumers to access credit in the course of a retail purchase are “credit cards,” subjecting the “card issuer” to certain additional disclosure and substantive obligations under Federal law. The Interpretive Rule would become effective 60 days after publication in the Federal Register. The CFPB is accepting comments on the Interpretive Rule through August 1, 2024, notwithstanding that the Bureau’s position is that notice-and-comment rulemaking is unnecessary for its interpretation to become effective.

Continue Reading CFPB Interpretive Rule Exposes Some BNPL Programs to Credit Card Requirements

On May 10, the United States District Court for the Northern District of Texas granted the credit card industry at least a temporary reprieve from a CFPB rulemaking that would have restricted late fees on consumer credit cards significantly (as described in more detail in our prior Legal Update).

Continue Reading CFPB Credit Card Late Fee Rule Stayed . . . For Now

The Department of Labor issued a final rule raising the thresholds applicable to an employer’s obligation to pay overtime. The rule sets new levels applicable to the so-called “executive, administrative, and professional” (“EAP”) exemption from overtime requirements and for qualifying as a “highly compensated employee.” The initial updates will become effective on July 1, 2024. The rule also establishes a new updating mechanism for setting those thresholds going forward.

As we have discussed previously in this CFS Review blog, the Department of Labor shook up the mortgage industry in 2010, announcing that mortgage loan originators would not typically qualify for the administrative exemption from the obligation to pay employees overtime and minimum wage under the federal Fair Labor Standards Act. Mortgage lenders then needed to examine the duties and compensation levels of their origination staff to determine whether they could remain exempt. If not, the lenders had to begin monitoring the hours those individuals worked – no easy feat, nor is the task of calculating a commissioned salesperson’s “rate of pay” for overtime purposes.

The new rule will raise the standard salary level to quality for the EAP exemption as follows:

  • Beginning July 1, 2024, $844 per week.
  • Beginning on January 1, 2025, $1,128 per week.

(Currently, that salary level is generally $684 per week.) The Department is not changing the duties test for the EAP exemption at this time.

In order to qualify for an exemption as a “highly compensated employee” (“HCE”) in addition to performing the duties of such an employee, he or she would have to earn at least the following salaries:

  • Beginning on July 1, 2024, $132,964 per year.
  • Beginning on January 1, 2024, $151,164 per year.

(Currently, that salary level is $107,432.) These salary standards will apply on a proportional basis to the extent they span time periods. The Department will continue to allow for a final make-up payment during the last pay period.

The Department’s final rule also adjusts the methodology for setting salary levels, explaining that the Department seeks to ensure that “fewer lower-paid white-collar employees who perform significant amounts of nonexempt work are included in the exemption,” and will be more effective in determining who is employed in a bona fide EAP capacity. The final rule provides that future updates to the standard salary level and HCE total annual compensation threshold with current earnings data will begin on July 1, 2027 and continue every three years thereafter.

On March 29, 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction prohibiting enforcement of the new Community Reinvestment Act (“CRA”) regulations against the plaintiffs in the case.

The CRA, passed in 1977, generally requires insured depository institutions to participate in investment, lending, and service activities that help meet the credit needs of their designated assessment areas—particularly low- and moderate-income communities and small businesses and farms. In October 2023, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Board”), and the Federal Deposit Insurance Corporation (“FDIC”) (the “Agencies”), which enforce the CRA, adopted new regulations significantly overhauling the existing CRA regulatory regime. We previously reported on the new CRA regulations here and here.

In February 2024, several banking trade associations filed a lawsuit in federal court challenging the new regulations and alleging that the new regulations run afoul of the CRA by evaluating banks (1) outside of the geographies where they operate physical facilities and accept deposits and (2) on deposit products, in addition to the existing evaluation of meeting the credit needs of the community. The District Court issued a preliminary injunction against enforcement of the new CRA regulations against the plaintiff trade associations pending resolution of the lawsuit. The District Court also extended the implementation date of the regulations as to the plaintiffs to be day for day while the injunction is in place.[1]

The scope of the preliminary injunction is limited to the plaintiffs, and, as it stands, does not apply to any other banks subject to the CRA. As a result, we expect that other trade associations or banks may try to join the case to obtain the benefits of the injunction, as we have seen in other recent cases challenging federal financial regulations. Another possibility is that the District Court could amend the preliminary injunction to apply to all banks impacted by the new CRA regulations.

In the meantime, separate from the lawsuit, the Agencies extended the deadline for most portions of the new CRA regulations that were initially set to go into effect on April 1, 2024: the delineation of facility-based assessment areas and the public file requirements. The Agencies extended the deadline for these two requirements until January 1, 2026, when the majority of new CRA regulations are scheduled to take effect.


[1] Interestingly, the District Court applied the injunction to the “Plaintiffs,” and not expressly to their member banks. However, applying the injunction to the plaintiffs’ members was most likely the District Court’s intention considering the plaintiffs are trade associations.

On March 5, the Consumer Financial Protection Bureau (the “Bureau”) issued a Final Rule that would significantly restrict late fees that consumer credit card issuers may charge to a mere $8.

Within two days, the Final Rule faced a challenge in the Northern District of Texas by a coalition of trade groups including the United States Chamber of Commerce, the American Bankers Association, and the Consumer Bankers Association. The challenge seeks to invalidate the Final Rule on several constitutional, procedural, and substantive bases, as well as a temporary stay of the rule’s effectiveness while the suit progresses.

In Mayer Brown’s Legal Update, we frame the Final Rule within current law, and describe the changes, the litigation, and the likely industry implications.

On February 23, 2024, the Consumer Financial Protection Bureau published an order establishing supervisory authority over a small-loan consumer finance company, using a Dodd-Frank Act provision that allows the Bureau to supervise certain nonbanks that it has reasonable cause to determine pose risks to consumers.

In Mayer Brown’s Legal Update, we summarize relevant aspects of the Bureau’s supervisory authority and highlight key takeaways from the order.

On March 5, the CFPB issued a final rule that would significantly reduce late fees that may be charged on consumer credit card accounts from $30 or more to $8 in most cases. A proposed rule on this subject matter was issued February 1, 2023, and the credit card industry has paid close attention to the rulemaking process since.

The final rule amends provisions of Regulation Z, implementing the Truth in Lending Act, related to permissible penalty fees—including late fees, NSF fees, returned payment fees, etc.— that a card issuer may impose on consumers who violate the terms of a credit card account subject to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”).

Continue Reading CFPB Finalizes Significant Restrictions on Credit Card Late Fees

FHA branch offices could become a thing of the past.

The Department of Housing and Urban Development published a final rule on February 2, 2024, eliminating the requirement for lenders to register each branch office where lenders and mortgagees conduct FHA business with HUD. FHA addressed questions from stakeholders in Frequently Asked Questions.

By eliminating the branch registration requirement, HUD hopes that by reducing burdens and eliminating barriers, more lenders will originate FHA-insured loans and expand the availability of FHA programs to underserved communities.

In Mayer Brown’s Legal Update, we discuss the background of HUD’s branch office requirements, the changes the final rule makes to those requirements, and takeaways for stakeholders.

On February 7, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking on certain US residential real estate transactions (“2024 NPRM”). The 2024 NPRM would require certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities or trusts. The 2024 NPRM describes the circumstances in which a report would be filed; who would file a report; what information would need to be provided—including information about the beneficial owners of the legal entities and trusts—and when a report about the transaction would be due.

Potentially affected participants should consider submitting comments on the 2024 NPRM by the April 16 deadline to encourage FinCEN to finalize a revised proposal that appropriately weighs the goals of preventing money laundering with potentially burdensome compliance obligations. 

Read more here.