SPRINGFIELD, Ill. — The Illinois Credit Union League is criticizing two federal lawsuits filed by nine merchant trade associations challenging regulatory actions that protect federally chartered financial institutions from an Illinois law restricting interchange fees.
The lawsuits, filed in U.S. District Court for the District of Columbia, challenge actions by the Office of the Comptroller of the Currency and the National Credit Union Administration involving the Illinois Interchange Fee Prohibition Act.
“These lawsuits are yet another attempt to preserve a fundamentally flawed law that would complicate payments and reduce resources credit unions use to provide affordable financial services, fraud protection, and payment innovation for their members,” Libby Calderone, president and CEO of the Illinois Credit Union League, said in a statement.
“Credit unions support a modern, secure payments system, and we remain confident that federal law protects federally regulated financial institutions from state laws that interfere with those activities,” Calderone added.
What Law Would Do
The Illinois law, enacted in June 2024 and now scheduled to take effect July 1, 2027, would prohibit credit and debit card interchange fees on the sales tax and gratuity portions of transactions. Its implementation has been delayed by litigation, regulatory actions and legislative postponements, as The CU Daily has reported.
The merchant groups contend the OCC and NCUA exceeded their authority in determining that federal law preempts the Illinois restrictions. According to the Illinois Credit Union League, the lawsuits also allege the agencies acted arbitrarily and capriciously by relying heavily on industry assertions without adequately addressing contrary evidence and failed to comply with applicable procedural requirements.
The challenge to the NCUA action focuses in part on differences between statutory preemption language governing federal credit unions and banks, the league said. The plaintiffs want the court to set aside the agencies’ actions and declare that federal law does not preempt the Illinois statute.
As the CU Daily reported, the National Retail Federation said the lawsuit against the OCC argues that neither the National Bank Act nor the agency’s rule authorizes the disputed interchange fees charged to merchants. The NCUA lawsuit argues that the Federal Credit Union Act does not preempt the Illinois law and that the agency failed to meet notice-and-comment requirements under the Administrative Procedure Act.
The plaintiffs are FMI — The Food Industry Association; the Illinois Fuel and Retail Association; the Illinois Restaurant Association; the Illinois Retail Merchants Association; the National Association of Convenience Stores; the National Grocers Association; the National Retail Federation; the Restaurant Law Center; and the Retail Litigation Center.
Prior Ruling
In September, a court expanded an existing injunction against enforcement of the law to include federally chartered credit unions, The CU Daily previously reported. National banks, federal savings associations, out-of-state chartered banks and card networks already had protection under the injunction. State-chartered banks and credit unions remain subject to the law. Illinois has about 235 state-chartered banks and nearly 200 state-chartered credit unions.
The new lawsuits add a separate challenge to federal regulators’ preemption determinations as the broader legal fight over the Illinois law continues. The Illinois Credit Union League said it will monitor the litigation and continue advocating for credit unions and their members.
