WASHINGTON—In a move welcomed by credit unions, the Office of the Comptroller of the Currency said it has issued an interim final rule and interim final order affirming that federal law allows national banks to charge certain fees regardless of whether they are set by the bank or a third party, while also preempting a new Illinois law regulating interchange fees.
The OCC said the actions address questions raised by the Illinois Interchange Fee Prohibition Act, which is scheduled to take effect July 1, 2026. The agency said the law would create a “complex, potentially unworkable, and destabilizing” framework for national banks, federal savings associations and payment card systems, particularly if other states adopt similar measures.
As the CU Daily has previously reported, enactment of the law will have ramifications for state-chartered CUs, with numerous questions still to be answered.
In its interim final order, the OCC said federal law preempts the Illinois statute, meaning OCC-regulated institutions are not subject to or required to comply with the law. The agency said the move is intended to prevent what it described as imminent negative effects on the payments system while maintaining that other applicable federal laws governing payment card activities remain unchanged.
‘Needed Clarity’
The America’s Credit Unions praised the OCC’s action, with President and CEO Scott Simpson saying it provides needed clarity.
“We appreciate the OCC formally clarifying federal preemption to protect financial institutions and consumers from the harmful effects of this misguided Illinois law,” Simpson said in a statement. “With the clarity that states cannot interfere with national bank powers, Americans are also protected from other efforts that would undermine the safety and stability of the payments system. Based on the Federal Credit Union Act and credit unions’ status as federal instrumentalities, federal credit unions should also be preempted from the IFPA and any other state law that encroaches against these national authorities. We are confident the NCUA will continue its leadership to provide similar clarification for credit unions and their millions of members.”
In a joint statement, the Illinois Bankers Association, Illinois Credit Union League, American Bankers Association and America’s Credit Unions said the OCC’s actions affirm both federal preemption and national bank powers and bolster their ongoing legal challenge to the Illinois law.
‘States Cannot Interfere’
“We welcome the Office of the Comptroller of the Currency’s interim final actions confirming both preemption of the Illinois Interchange Fee Prohibition Act by federal law and national banks’ federal powers,” the groups said. “The OCC’s actions make it clear that states cannot interfere with national bank powers that President Lincoln and Congress placed firmly under federal authority more than 160 years ago and remain essential to the effective functioning of our banking system.
“These actions are consistent with the OCC’s prior amicus filings in this case and with the agency’s public commitment – both in this administration and the previous one – to defend federal preemption. They reinforce the firm legal foundation of our ongoing appeal and underscore that Illinois’ misguided law is unlawful and should not be implemented. The OCC’s actions should also send a strong signal to other states to follow the law and not repeat Illinois’ mistake.
NCUA Encouraged to Follow
“We appreciate the OCC’s clear affirmation that federal law must govern national banking activities. We encourage the NCUA to follow the OCC’s lead and similarly defend federal preemption for credit unions.”
The OCC said its actions reinforce the federal government’s role, including that of Congress, in establishing consistent national standards for payment card activities, including interchange fees.
