WASHINGTON—The National Credit Union Administration has submitted a rulemaking to the Office of Information and Regulatory Affairs affirming that federal law preempts Illinois’ Interchange Fee Prohibition Act, a move welcomed by credit union trade groups that said the action will help preserve consistency in the national payments system.
The rulemaking, which is expected to be published in the Federal Register imminently, follows earlier action by the Office of the Comptroller of the Currency declaring that federal law preempts the Illinois law for national banks and federal savings associations.
The Illinois Interchange Fee Prohibition Act, scheduled to take effect July 1, 2026, would prohibit card issuers, payment card networks and others from charging or receiving interchange fees on the tax and gratuity portions of debit and credit card transactions.
In announcing its earlier action, the OCC said it 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 the Illinois law.
The OCC said the Illinois measure 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.
America’s Credit Unions: ‘State Laws Can’t Encroach’
America’s Credit Unions praised the NCUA’s pending action and credited NCUA Chairman Kyle Hauptman for supporting federal credit unions.
“We thank Chairman Hauptman for his leadership and commitment to ensure credit unions and their 146 million members are protected from harmful efforts to change the national payments system,” America’s Credit Unions President and CEO Scott Simpson said in a statement. “The NCUA’s rulemaking, now submitted to OIRA for review, confirms preemption for federal credit unions as it relates to interchange fees.”
Simpson said the NCUA’s action, combined with the OCC’s earlier ruling, demonstrates that “state laws cannot encroach against national authorities nor undermine the safety and stability of our national payments system.”
He added that America’s Credit Unions continues to challenge the Illinois law and “other attempts to create chaos within the payments system.”
DCUC: ‘Clear National Standard Needed’
The Defense Credit Union Council also backed the NCUA’s reported action, saying federal credit unions require a “clear and uniform national framework” as states pursue what it described as inconsistent interchange and payment-related mandates.
“Defense credit unions serve millions of servicemembers, veterans, Department of War personnel, and military families who depend on seamless electronic payment systems, fraud protections, and uninterrupted access to financial services regardless of where they are stationed around the world,” DCUC Chief Advocacy Officer Jason Stverak said in a statement.
Stverak said a fragmented state-by-state approach to interchange regulation could increase operational complexity, raise compliance costs and ultimately harm consumers.
DCUC said it has consistently urged the NCUA to ensure federal credit unions are not placed at a competitive disadvantage compared with federally regulated banks.
‘Essential Infrastructure’
Anthony Hernandez, DCUC president and CEO and a retired U.S. Air Force colonel, said payment systems are “essential infrastructure for modern life,” supporting payroll, benefits access, budgeting and secure transactions for military families, including during deployments and permanent change-of-station moves.
“A unified federal framework helps ensure these systems remain reliable and interoperable for servicemembers and their families, who often face unique mobility and financial demands,” Hernandez said.
Some Still in Limbo
As the CU Daily previously reported, the Illinois law also has implications for out-of-state-based, state-chartered credit unions, with numerous questions surrounding how the law would apply to those institutions.
