New York Attorney General Letitia James speaks to the media after she pleaded not guilty to charges, outside the U.S. District Court for the Eastern District of Virginia, in Norfolk, Virginia, U.S., October 24, 2025. REUTERS/Jonathan Ernst/
New York Attorney General Letitia James is challenging President Donald Trump again — and this time she's challenging the power of his presidency.
Law&Crime spotted the 27-page court filing, which is being joined by Oregon Attorney General Dan Rayfield and eight other attorneys general. They allege that the Trump administration isn't doing its job enforcing payments from big banks over their "predatory practices."
At issue is that many home mortgages include an escrow account. Each month, the homeowner pays a little extra, and the bank hangs onto that money for property taxes and homeowners' insurance.
"However, lenders often required significantly larger deposits than necessary," allowing them to profit from homeowners' money, the lawsuit says.
There are many states that have specific laws saying that if the bank holds your escrow funds, it must pay you interest. For example, Oregon requires a 2.61 percent interest and California requires at least 2 percent interest.
The Office of the Comptroller of the Currency (OCC), which regulates banks, decided that national banks, not state laws, can determine whether mortgage banks must pay interest. The administration argues that it frees up capital for the bank to trickle down. If the banks chose, they could lend to more people or reduce fees. Or, they could continue to profit from the interest.
Trump's administration believes that its new rules can overpower the laws. The states argue that the OCC doesn't have any legal authority to ignore, let alone eliminate, laws on the books.
"Instead, it exists solely as a pretext to manufacture a conflict between this new federal rule and state interest-on-escrow laws," the lawsuit continues.
The states aren't seeking damages for the homeowners; they merely want the courts to rule that the OCC's actions are unlawful and that these mortgage banks must follow the law. If there are any financial awards available, the suit asks that they be given for attorneys' fees.
As James explains in a press release, "In May 2026, OCC issued two new rules to prevent state escrow interest laws from applying to national banks and federal savings associations, threatening the interest payments that help homeowners pay their bills."
The Trump administration rules "violate the law by exceeding critical limits that Congress placed on OCC's ability to preempt state consumer protection laws in the wake of the 2008 financial crisis," the release continues.
"At a time when homeownership is more expensive than ever, the Trump administration is trying to make it even more costly with these unlawful rules," James continues. "Big banks and mortgage lenders should not be able to force homeowners to lock away significant amounts of money without paying interest. For decades, New York has prevented lenders from taking advantage of homeowners, and my office is taking action to defend our laws."