BOSTON – A federal appeals court ruled Sept. 22 that Citizens Bank must show why it shouldn’t pay Rhode Island borrowers interest on the money they deposit into mortgage-escrow accounts , as required by state law.

A three-judge appeals panel ruled that Citizens must make its case why the federal National Bank Act preempts a state law dictating that all banks in Rhode Island pay interest on mortgage escrow accounts. The court sent the matter back to the U.S. District Court in Rhode Island for a judge to consider the case under a U.S. Supreme Court precedent requiring that judges consider how the state law “interferes” with federal banking powers.

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