WASHINGTON (AP) — The Supreme Court on Thursday gave homeowners another chance to force Bank of America and other major banks to pay interest on escrow mortgage accounts.
The court unanimously rejected an appeals court ruling in favor of Bank of America, which has refused to pay interest on money it raises to pay borrowers’ insurance and property taxes. New York requires banks to pay 2% interest on blocked funds.
Thirteen other states have similar laws: California, Connecticut, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, Oregon, Rhode Island, Utah, Vermont and Wisconsin.
A federal judge initially ruled in favor of the borrowers, but the federal appeals court in New York granted Bank of America’s request to dismiss the lawsuits, arguing that federal law requiring national banks does not allow such regulation on a state-by-state basis.
Writing for the Supreme Court, Justice Brett Kavanaugh said the appeals court failed to conduct the kind of nuanced analysis required by federal law and previous Supreme Court decisions to determine whether a state law should give way to a federal statute.
In particular, Kavanaugh noted that the Dodd-Frank Act, enacted after the 2008 financial crisis, made clear that not all state banking laws would be preempted.
Jonathan Taylor, who argued the case for the homeowners, said in an email that the decision is a victory for consumers because it “affirms Congress’s determination in Dodd-Frank to continue the kind of aggressive preemption of consumer finance laws the state, which helped lead to the financial crisis.”
Bank of America did not immediately comment on the decision.
