Conti v. Citizens

Section 1044 of the Dodd-Frank Act codified the NBA preemption standard from the Supreme Court’s decision in Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), ruling the NBA preempts state law if it “prevents or significantly interferes with the exercise of a national bank’s power.”

Under Rhode Island’s IOE law, banks must pay interest on amounts customers deposit into mortgage escrow accounts. Conti and a class of borrowers (plaintiffs) sued Citizens Bank, alleging it breached its mortgage agreement by failing to pay the required interest. Citizens Bank moved to dismiss, arguing the NBA preempts plaintiffs’ claims because it need not pay interest on mortgage escrow accounts under the NBA.

In September 2022, Judge Mary S. McElroy of the U.S. District Court for Rhode Island dismissed plaintiffs’ lawsuit, holding that the NBA preempted the IOE law. The court relied on the Second Circuit’s decision in Cantero, which found New York’s IOE law preempted because it controlled national banks’ exercise of their powers. While Conti’s appeal was pending, the Supreme Court granted certiorari in Cantero, prompting the First Circuit to stay the case. On May 30, 2024, the Supreme Court vacated the Second Circuit’s ruling, explaining the Dodd-Frank Act expressly incorporated the preemption standard from Barnett Bank. That standard, according to the Court, did not permit “bright line” rules, but requires courts to engage in a “practical assessment of the nature and degree of the interference caused by a state law” and conduct a “nuanced comparative analysis,” looking at Barnett Bank and the decisions cited in that opinion.

After Cantero, ABA filed a coalition amicus brief urging the First Circuit to affirm that the NBA preempts Rhode Island’s IOE law. ABA argued mortgage escrow accounts are critical tools in the U.S. banking system, and Rhode Island’s pricing scheme significantly interferes with the exercise of national bank powers. ABA emphasized that the interference in Rhode Island’s IOE law is far more significant than the advertising ban in the Franklin decision, because pricing interferes with bank operations more than advertising.

On September 29, 2025, a unanimous First Circuit panel vacated the district court’s decision. Applying Cantero, the panel found no express conflict between the IOE law and the NBA and concluded that Citizens Bank failed to demonstrate that the IOE law conflicts with the overall federal-banking scheme or that it significantly interferes with its federal banking powers.  In response, Citizens Bank petitioned the U.S. Supreme Court for review, arguing that the panel’s decision was wrong and directly conflicted with Cantero. Citizens Bank also argued that the question of whether the NBA preempts Rhode Island’s IOE law is extremely important to national banks, federal regulators, and consumers.

In its most recent brief, ABA made three main arguments. First, ABA argued that lower courts are deeply divided over Cantero and that immediate review is needed before state pricing schemes proliferate. Courts have interpreted Cantero in conflicting ways, including a split Ninth Circuit decision in Kivett, where the majority relied on pre‑Cantero precedent and the dissent applied Cantero’s comparative analysis. ABA warned that leaving Conti intact would invite varied state escrow‑interest mandates and other pricing rules, undermining the uniform federal banking system Congress intended.

Next, ABA argued that the question presented of whether the NBA preempts Rhode Island’s IOE law is of exceptional importance and warrants the U.S. Supreme Court’s immediate review. Mortgage escrow accounts illustrate why states should not impose pricing requirements on national banks, because inconsistent IOE mandates create practical harms for homeowners and lenders. Escrow accounts are widely used, help borrowers manage expenses, and protect lenders by ensuring timely tax and insurance payments. Although RESPA extensively regulates escrow practices, it does not require interest payments, and national banks need pricing flexibility to manage credit risk. Empirical research, including Iowa’s repeal of its IOE law, shows that removing such mandates increases originations and reduces fees, with the greatest benefits for lower-income borrowers. With at least twelve states imposing differing IOE requirements, ABA cautioned that these laws create a patchwork that threatens the uniform national banking system and could spur broader state pricing mandates.

Finally, ABA argued that the panel’s decision is irreconcilable with Cantero. ABA explained that the panel’s decision is irreconcilable with Cantero because the court misapplied the Supreme Court’s significant‑interference framework in three ways. First, the panel erred by dismissing key precedents, including Franklin, Barnett Bank, and Fidelity, even though Cantero identified these decisions as central to the preemption analysis and made clear that pricing restrictions interfere with national bank powers even more than the advertising limits at issue in Franklin. Second, the panel erred by failing to recognize that state IOE laws are out of step with the federal statutory scheme, which extensively regulates escrow accounts through RESPA, reflects Congress’s repeated refusal to impose a universal interest mandate, and preserves national banks’ discretion over pricing. Finally, the panel erred by underestimating the practical effects of state IOE laws, contrary to common sense, because Cantero does not require bank‑specific evidence to determine preemption, and longstanding precedent shows that state laws dictating the pricing of a core banking product necessarily burden national banks’ ability to manage risk, set terms, and conduct their business efficiently. ABA concluded that a proper application of Cantero compels preemption of Rhode Island’s IOE law.