The ten states challenging the Office of the Comptroller of the Currency’s (OCC) new interest-on-escrow rules are urging a federal district court to reject the agency’s attempt to delay judicial review of those rules while the U.S. Supreme Court considers three petitions involving the preemption of state mortgage interest-on-escrow laws. In an October 23, 2026 filing the states argue that the Supreme Court proceedings discussed below will not resolve the central issues in their Administrative Procedure Act (APA) challenge, that an indefinite stay would harm both the states and consumers, and that the OCC has not demonstrated the hardship necessary to justify delaying the case.

The filing is the latest development in State of Oregon et al. v. Office of the Comptroller of the Currency et al., No. 3:26-cv-01672-SI, pending in the U.S. District Court for the District of Oregon. The case challenges the OCC’s two May 2026 rules that purport to preempt state laws requiring interest to be paid on mortgage escrow accounts maintained by national banks.

Background: The OCC’s Two Interest-on-Escrow Rules

As discussed in our prior coverage, on May 19, 2026, the OCC published two final rules addressing national banks’ authority over mortgage escrow accounts. The Escrow Powers Rule, published at 91 Fed. Reg. 29340, grants national banks authority to determine the interest and fees associated with their escrow accounts. The accompanying Preemption Rule, published at 91 Fed. Reg. 29350, purports to preempt state mortgage interest-on-escrow laws.

The rules implicate a longstanding dispute over the scope of national bank preemption under the National Bank Act and the limits Congress imposed on the OCC’s preemption authority in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Ten states; California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, and Vermont, have enacted laws requiring interest to be paid on mortgage escrow balances, with some also restricting service charges. The states contend that the OCC’s rules improperly displace these consumer protections by adopting a categorical approach to preemption.

The states’ challenge relies in substantial part on 12 U.S.C. § 25b, which requires the OCC to make preemption determinations under the standard articulated by the Supreme Court in Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996). Section 25b also imposes procedural requirements, including case-specific findings supported by substantial evidence, and limits judicial deference to the OCC’s preemption determinations.

The states further rely on the Supreme Court’s 2024 decision in Cantero v. Bank of America, N.A., 602 U.S. 205, which rejected the Second Circuit’s categorical approach to National Bank Act preemption and remanded for application of the proper standard.

In August 2026, the states filed suit seeking to have the two OCC rules declared unlawful and set aside under the APA. Their complaint asserts that the rules exceed the OCC’s statutory authority, violate statutory procedural requirements, and are arbitrary and capricious.

The OCC Seeks a Partial Stay Pending Supreme Court Proceedings

On October 5, 2026, the OCC filed a motion to dismiss or transfer the action raising challenges that include standing, venue, and the merits of the states’ APA claims. On October 9, the OCC separately moved for a partial stay of proceedings.

The stay motion seeks to pause the case, except for proceedings necessary to resolve the OCC’s motion to dismiss or transfer, pending resolution of three Supreme Court proceedings concerning state interest-on-escrow laws:

On October 5, the Supreme Court invited the Solicitor General to express the views of the United States on the pending petitions. It did not grant certiorari in any of the three cases, and, as is usual in cases in which the Supreme Court invites the Solicitor General to express its views on whether cert petitions should be granted, the orders inviting the Solicitor General’s views did not establish a deadline for the government’s submissions.

The OCC argues that Supreme Court consideration of the cases could simplify the Oregon litigation or clarify the applicable preemption standard. The states respond that the agency is relying on a series of uncertain future events and that the Supreme Court proceedings will not resolve the distinct questions raised by the OCC’s rulemaking.

The States’ Opposition: The Supreme Court Cases Will Not Resolve the APA Challenge

The states’ October 23 opposition argues that a stay would not promote the orderly course of justice because the Supreme Court cases and the Oregon action present materially different legal questions.

The Supreme Court cases involve private lawsuits in which borrowers assert claims against banks, including breach-of-contract and related claims, and banks invoke federal preemption as a defense. The Oregon action, by contrast, challenges the legality of the OCC’s administrative actions under the APA.

According to the states, even a Supreme Court ruling that one or more state mortgage interest-on-escrow laws are preempted would not answer whether the OCC complied with Dodd-Frank’s requirements when promulgating its rules. Nor would such a ruling necessarily resolve whether the OCC exceeded its statutory authority or acted arbitrarily and capriciously.

The states emphasize that the OCC’s rulemaking methodology is itself at issue. The court must determine whether the agency followed the statutory procedures governing its preemption authority and whether the resulting rules are legally sustainable on the administrative record. A later Supreme Court decision concerning the preemption of a particular state law, they argue, would not cure a defect in the OCC’s rulemaking process.

The states also point out that the three Supreme Court proceedings concern only the laws of Rhode Island, New York, and California. The other seven plaintiff states have materially different statutory provisions. Thus, even if the Supreme Court ultimately ruled that the three laws before it were preempted, the Oregon court would still need to address the validity of the OCC’s rules under Dodd-Frank and the application of the governing preemption standard to the other states’ laws.

The opposition also challenges the OCC’s reliance on the possibility that the Supreme Court will clarify the applicable legal standard. The states note that the Supreme Court has not yet agreed to hear any of the cases and could deny review or take other procedural action without deciding the underlying preemption question.

In the states’ view, the OCC is asking the district court to delay a case that is ready to proceed based on the speculative possibility that future Supreme Court action might prove helpful to the agency.

The States Invoke the Landis Standard for a Stay

The opposition analyzes the OCC’s request under Landis v. North American Co., 299 U.S. 248 (1936), and Ninth Circuit precedent. Under that framework, courts consider three factors: whether a stay would promote the orderly course of justice by simplifying or complicating the issues; the potential damage a stay would cause; and the hardship or inequity the moving party would suffer if required to proceed.

The states contend that all three factors weigh against a stay.

1. A stay would not materially simplify the case

As explained above, the states maintain that the pending Supreme Court cases will not resolve the central APA questions presented by the challenge to the OCC’s rules. Those questions include the agency’s statutory authority, its compliance with Dodd-Frank’s procedural requirements, and whether its rules are arbitrary and capricious.

The states also stress that the Supreme Court has not granted review in any of the three cases. A stay would therefore rest on multiple contingencies: the Court would have to grant one or more petitions, reach the substantive preemption question, and decide it in a way favorable to the OCC.

The opposition invokes Boaz v. First Bank & Trust, No. 6:21-cv-00084-AA, 2022 WL 17360541 (D. Or. Dec. 1, 2022), in which a district court declined to stay a case based on the speculative possibility that the Supreme Court might accept a case and issue a favorable ruling.

2. A stay would harm the states and consumers

The states argue that the OCC’s rules are already in effect and purport to displace their duly enacted statutes. Delaying judicial review would prolong the alleged injury to their sovereign interests in enforcing those laws.

The opposition separately emphasizes the potential financial consequences for mortgage borrowers. Mortgage escrow accounts can carry substantial positive balances, and interest-on-escrow laws require servicers to compensate consumers for the use of those funds. Without such requirements, banks may retain the economic benefit of using escrow balances without paying interest.

The states point to the OCC’s own explanation of the Preemption Rule, which acknowledges that the rule is likely to reduce expenditures by OCC-supervised institutions because they may elect not to pay interest on mortgage escrow funds in reliance on preemption.

The states argue that leaving the rules in place while the litigation is suspended would permit national banks to stop making payments required under state law, to the financial detriment of consumers. They contend that this harm is relevant to the stay analysis even though consumer injury is not the basis on which they rely to establish their own standing.

The requested stay would be particularly problematic, the states argue, because its duration is uncertain. The Supreme Court’s next steps depend in part on the Solicitor General’s submissions, and the stay motion identifies no definite endpoint. The states contend that their interests and consumers’ interests should not be subordinated for an unknown period while the validity of the OCC’s rules remains untested.

3. The OCC has not demonstrated sufficient hardship

The states characterize the OCC’s claimed hardship as the expense of producing and reviewing the administrative record and briefing the merits.

They argue that ordinary litigation costs do not constitute the clear case of hardship or inequity required under Landis, particularly when a stay could cause harm to other parties or nonparties. The states also note that the parties agree the case does not require discovery beyond production of the complete administrative record.

Once the record is produced, the parties can proceed through cross-motions for summary judgment, allowing the court to resolve the APA issues on a relatively direct schedule.

The states further criticize the OCC’s proposal to stay the merits proceedings while allowing its own motion to dismiss or transfer to proceed. In their view, this asymmetric arrangement would permit the OCC to litigate its preferred threshold defenses while preventing the states from obtaining a decision on their affirmative claims. They argue that the OCC’s preference for proceeding with its own motion while delaying the states’ claims is not a cognizable hardship warranting a stay.

What Happens Next?

The October 23 filing is an opposition, not a court ruling. The district court has not yet decided whether to grant the OCC’s partial-stay motion.

The case also remains subject to the OCC’s separate motion to dismiss or transfer, which the states opposed in a filing dated October 19, 2026. The two motions raise distinct issues: the dismissal or transfer motion challenges the court’s ability to hear the action and the legal sufficiency of the states’ claims, while the stay motion asks the court to postpone consideration of the merits pending Supreme Court proceedings.

The court’s October scheduling framework requires the OCC to file reply briefs on November 2 (motion to dismiss or transfer venue) and November 6 (motion for stay) with anticipated resolution of the pending dismissal and stay motions by November 20, 2026. Production of the administrative record will be due December 9 if the motions are denied. Those dates provide the next significant procedural markers, although the actual course of the case will depend on the court’s rulings.