WASHINGTON — America’s Credit Unions and the Illinois Credit Union League have joined with the American Bankers Association and the Illinois Bankers Association in sending a new joint comment letter expressing strong support for both the Office of the Comptroller of the Currency’s interim final rule on national bank non-interest charges and fees, and the OCC’s interim final order preempting the Illinois Interchange Fee Prohibition Act.
In a separate letter, the Defense Credit Union Council (DCUC) also expressed support for the OCC.
As the CU Daily reports here, the Illinois legislature has voted to delay the implementation of the law for one year, and it will now take effect July 1, 2027. The law prohibits interchange fees from being charged on the tax and gratuity portions of electronic payment transactions. It also establishes documentation and refund requirements, imposes civil penalties for violations and restricts the use of transaction data except for processing payments or where otherwise required by law.
In a statement, ACU, the ICUL, the ABA and the IBA said the actions eliminate “any possible doubt that the [IFPA] is an unlawful encroachment on the uniform national banking and payments system.” The groups have an ongoing legal challenge against the IFPA.
As the CU Daily has been reporting, the four trade groups are all plaintiffs in a lawsuit challenging the new Illinois laws, which affects interchange and is to go into effect on July 1.
OCC Applauded
In their letters, the groups applaud the OCC for acting to preserve a nationally uniform banking and payments system by confirming national banks’ broad fee-collection authority — including interchange fees — and by making clear that the Illinois law is preempted under federal law. The groups reiterated their position that interchange fees compensate issuers for administering credit and debit accounts, authorizing transactions, monitoring for fraud and supporting other services that enable card-based payments to function smoothly and securely.
Letter on OCC Interim Final Rule
The letter addressing the OCC’s interim final rule emphasizes that, even before the OCC’s recent actions, the National Bank Act already provides national banks the authority to charge and receive fees in the course of banking, including interchange fees in particular, and it plainly preempts the IFPA.
In a statement, the groups said they have also stressed that the interim final rule provides valuable regulatory clarity in light of recent litigation that created uncertainty around the scope of national banks’ fee authority.
“The Associations appreciate this prompt action to preserve regulatory clarity, protect the integrity of the national banking and payments system, and prevent harmful fragmentation of the payments ecosystem,” the letter states.
Warning Shared
In addition, the groups said they have also sought to warn that allowing the Illinois law to take effect would impose sweeping operational and compliance burdens, forcing stakeholders to attempt to replace a nationally uniform payments system with a fragmented patchwork reflecting jurisdiction-specific rules.
“The letters also note that similar legislation is under consideration in more than 25 other states and caution that additional state-by-state requirements would magnify costs and risks for financial institutions, merchants and consumers nationwide,” the trade groups said in a statement.
Letter on OCC’s Preemption Order
In a separate letter supporting the OCC’s preemption order, the groups commended the agency for concluding that federal law preempts the IFPA with respect to both its interchange-fee restriction and its data-use provision.
The group said the letter also seeks to explain that the Illinois law would significantly interfere with national banks’ and federal savings associations’ exercise of their powers by imposing extraordinary operational complexity and liability risk, including the prospect of steep penalties for noncompliance.
“The OCC’s preemption order settles this point beyond any possible doubt—remedying confusion generated by the Illinois Bankers Association decision and helping shield national banks, federal savings associations, consumers, and the broader American economy from the costs of intrusive state legislation,” the letter states.
The letter concludes by emphasizing that the OCC’s actions will ensure durable regulatory certainty and deter state or local efforts that would disrupt nationwide payments by imposing inconsistent and unworkable rules.
Defense Council Expresses it Support
Separately, the Defense Credit Union Council (DCUC) said it also supports the OCC’s determination that federal law preempts the Illinois Interchange Fee Prohibition Act (IFPA) for institutions supervised by the OCC, arguing that the state law would disrupt the nation’s payments system and increase costs for financial institutions and consumers.
In a letter to the OCC, DCUC endorsed the agency’s interim final rule and interim final order addressing the Illinois law, as well as the OCC’s clarification that national banks may continue to charge and receive non-interest compensation, including interchange fees generated through payment card transactions, even when those fees are established in consultation with third parties.
“DCUC applauds the OCC for taking timely and decisive action to preserve the integrity, consistency, and security of the nation’s payments system,” DCUC President and CEO Anthony Hernandez said in a statement. Hernandez added that maintaining a reliable national payments framework is critical for credit unions and their members to ensure uninterrupted access to financial services, operational certainty, and continued investment in fraud prevention and payments innovation.
‘Beyond Pricing’
In its letter, DCUC said the law reaches beyond pricing issues and directly affects how payment card networks process transactions and manage transaction data.
“A national payments system cannot function efficiently if banks, credit unions, merchants, processors and payment networks are forced to operate under fragmented state-by-state transaction-processing mandates,” Jason Stverak, DCUC’s chief advocacy officer, wrote on behalf of the organization.
DCUC pointed to the OCC’s findings that existing payment card infrastructure is not designed to automatically separate taxes and gratuities from transaction amounts, requiring significant technological and operational changes across payment networks, financial institutions and merchants.
According to DCUC, the OCC estimated that without federal preemption, OCC-supervised institutions would incur more than $232 million in initial system-upgrade costs, approximately $145 million annually in manual documentation-processing expenses during the first several years and roughly $200 million in lost issuer revenue.
The trade group said those costs could ultimately be passed on to consumers through reduced services, higher expenses and diminished access to payment products.
Additional Support Expressed
DCUC also backed the OCC’s conclusion that the Illinois law’s restrictions on transaction data use interfere with federally authorized banking powers. The organization said payment data plays a critical role in fraud prevention, cybersecurity, risk management, operational efficiency and consumer services.
The group further urged NCUA to take similar action to protect federal credit union authorities and preserve what it described as a uniform national payments framework.
“Service members, veterans and their families depend on a reliable national payments infrastructure, not one that changes from state to state based on conflicting transaction-processing mandates,” DCUC said.
DCUC noted that public reporting on the Illinois law has highlighted concerns within the credit union industry that restrictions on interchange revenue could affect funding for fraud prevention programs, rewards programs and future payments technology investments.
The organization thanked the OCC for acting before the law’s effective date and said the agency’s actions are necessary to maintain consistency across the banking and payments sectors.
“The OCC’s interim final order and companion interim final rule are necessary, well-reasoned, and vital to preserving the integrity of the national banking system and the broader payments ecosystem on which consumers, businesses and military communities rely every day,” Stverak said.
