WASHINGTON — In a case in which credit unions have a strong interest and have been significantly involved, the Office of the Comptroller of the Currency is urging a federal court to block enforcement of Illinois’ interchange fee law, arguing the agency’s recent preemption action makes further litigation unnecessary.
In an amicus brief filed Friday, the OCC said a federal judge should refrain from issuing a ruling on the Illinois Interchange Fee Prohibition Act because the agency’s own regulatory action will independently preempt the measure before it takes effect, as the CU Daily reported.
PaymentsDive reported the OCC issued an interim final order last month preempting the Illinois statute. The agency’s revised final rule is scheduled to take effect June 30, one day before the Illinois law is set to become effective.
The legal challenge dates to August 2024, when four trade groups — Illinois Bankers Association, American Bankers Association, America’s Credit Unions and Illinois Credit Union League — sued Illinois after Gov. JB Pritzker signed the legislation.
What IFPA Would Do
The Interchange Fee Prohibition Act seeks to prohibit interchange fees from being charged on portions of transactions tied to taxes and gratuities. Illinois became the first state to enact such a measure, prompting similar proposals elsewhere as merchants and restaurant groups sought relief from card-processing costs.
Earlier this month, the United States Court of Appeals for the Seventh Circuit vacated a lower court ruling that had upheld the central provisions of the law and returned the case for further review in light of the OCC’s preemption action, PaymentsDive reported.
Illinois Attorney General Kwame Raoul has challenged the OCC’s move, arguing in court filings that the agency failed to comply with rulemaking procedures required under the Administrative Procedure Act.
The AG also argued that even if the OCC rule survives legal scrutiny, national banks still lack authority under the National Bank Act to collect interchange fees that are not established through competitive processes.
Meanwhile, the banking and credit union plaintiffs argued the OCC’s action affirms existing authority for national banks to collect interchange fees, including default rates set by card networks. The groups further contended the agency acted quickly because uncertainty surrounding the Illinois law threatened card-payment availability and created operational risks for financial institutions.
NCUA On Parallel Path
Meanwhile, as the CU Daily reported, NCUA is pursuing a parallel path. The agency submitted an interim final rule concerning federal credit union preemption authority over non-interest charges and fees for review by the Office of Management and Budget, though details of the proposal have not yet been released.
