Statement of Interest
Pursuant to Federal Rule of Appellate Procedure 29, Amici respectfully submit this brief in support of Defendant-Appellant and reversal of the District Court’s ruling.[1]
BPI. BPI is a nonpartisan public policy, research, and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. BPI produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
ABA. Established in 1875, the ABA is the united voice of America’s $23.4 trillion banking industry, comprised of small, regional, and large national and State banks that safeguard nearly $18.6 trillion in deposits, and extend more than $12.3 trillion in loans.
Chamber. The Chamber is the world’s largest business federation. It represents approximately 300,000 members and indirectly represents the interests of more than three million businesses and professional organizations of every size, in every industry sector, and from every region of the country. An important function of the Chamber is to represent the interests of its members in matters before Congress, the Executive Branch, and the courts.
CBA. The CBA is the trade association for banking services geared toward consumers and small businesses. Its members include the nation’s largest financial institutions, as well as many regional banks, which operate in all 50 States and collectively hold two-thirds of the country’s total deposits.
MBA. The MBA is the national association representing the real estate finance industry, an industry that employs more than 300,000 people in virtually every community in the country. Its membership of more than 2,200 companies includes all elements of real estate finance: independent mortgage banks, mortgage brokers, commercial banks, thrifts, REITs, Wall Street conduits, life insurance companies, credit unions, and others in the mortgage lending field.
Amici routinely submit amicus curiae briefs in cases that present questions critical to the banking and financial systems, including questions of national preemption under the National Bank Act of 1864.
Introduction
This appeal presents a federal question with far-reaching consequences: whether the National Bank Act of 1864 (“NBA”) preempts a State from imposing price controls on the products and services of national banks. Although this question is presented here in the specific form of California Civil Code § 2954.8(a)—which requires all mortgage lenders to pay interest “at the rate of at least 2 percent simple interest per annum” on borrowers’ funds held in escrow—this Court’s decision could impact State attempts to set price controls on many other core national bank products, such as loan rates, checking account interest, and service fees.
Following the U.S. Supreme Court’s decision in Cantero v. Bank of America, N.A., 602 U.S. 205 (2024), this Court is tasked with conducting a “nuanced comparative analysis,” comparing the nature of the interference caused by Section 2954.8(a) with the interference in prior Supreme Court decisions to determine whether Section 2954.8(a) is preempted. If the law “prevents or significantly interferes with the national bank’s exercise of its powers” in a manner akin to the interference in cases where the Supreme Court found preemption, then it too is preempted. Id. at 220 (citing Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25 (1996)). This analysis entails a “practical assessment” of the State law, accounting for past precedent, the law’s text and structure, and, critically, common sense. 602 U.S. at 219 & 220 n.3. Under the mandate in Cantero, this Court should reverse the decision below and hold that Section 2954.8(a) is preempted as to national banks.
First, the “comparative analysis” required by the Supreme Court establishes that the NBA preempts State-imposed price controls on national bank products and services. As the Supreme Court has made clear, not all State regulations on national banks will be preempted. But nothing more inevitably significantly interferes with a national bank’s ability to provide products and services than mandating rates the bank must or cannot pay. Imposing interest rate controls can force the bank entirely out of the business or at least materially circumscribe the business and force significant changes in the way it is conducted. If a State can regulate the interest rate a national bank can pay on a mortgage escrow account, why can it not regulate the rate it must pay on a checking account, a savings account, or any other account? Why can the State not limit the rate that a bank can charge on a loan or any other service? Accordingly, as Justice Kavanaugh explained at the Cantero oral argument, State-imposed price controls intrude on national banks’ core powers to a far greater extent than laws the Supreme Court has found to be preempted in the past. See infra at 14-15.
Mortgage escrow accounts are an essential tool for ensuring borrowers meet their obligations, and the interest earned in respect of these accounts is an integral part of managing the costs and risks associated with offering mortgage services. State laws like California’s pricing scheme impose what Justice Kavanaugh—who wrote the unanimous Cantero opinion—suggested was comparable to a “tax on the bank to sell the product,” see Cantero Tr. at 13-14, severely limiting a national bank’s ability to provide mortgage loans efficiently and effectively. Put simply, pricing mandates impose additional costs and burdens on national banks, which, in the case of escrow accounts, must be offset by passing on increased costs to borrowers or not originating certain loans.
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[1] The undersigned counsel certify that no party’s counsel authored this brief in whole or in part, and no party or party’s counsel, or any other person, other than the Amici, their members, or their counsel, contributed money that was intended to fund preparing or submitting this brief. See Fed. R. App. P. 29(a)(4)(E).
