CHICAGO — The Illinois Attorney General has filed a reply brief in the U.S. Court of Appeals for the Seventh Circuit defending key provisions of the state’s Interchange Fee Prohibition Act (IFPA), while also seeking to overturn part of a lower court ruling.
Credit unions are among the plaintiffs that have filed suit against the IFPA, which affects interchange.
The brief, filed April 3, asks the appellate court to uphold a district court decision supporting the law’s limits on interchange fees, while reversing the lower court’s ruling on provisions governing the use of transaction data, according to America’s Credit Unions.
The attorney general’s argument takes a narrow view of federal preemption under both the National Bank Act and the Federal Credit Union Act, contending that the Illinois law does not significantly interfere with federally granted powers, America’s Credit Unions said.
Precedent Cited
Citing the U.S. Supreme Court’s decision in Barnett Bank of Marion County, N.A. v. Nelson, the state argues that federal preemption applies only when state law creates more than an inconvenience for federally regulated entities. The brief maintains that the IFPA’s interchange fee restrictions do not meet that threshold, America’s Credit Unions said.
The trade group added that the filing also asserts that the National Bank Act’s preemption standard does not extend to federal credit unions and that the Federal Credit Union Act lacks an express preemption clause. It further argues that interchange fee collection is not explicitly listed among federal credit unions’ core powers, and therefore limiting such fees would not materially affect federal interests.
Additional Arguments
In addition, America’s Credit Unions reported the attorney general argues that even if federal law preempts application of the interchange fee limits to financial institutions, that protection should not extend to payment card networks such as Visa and Mastercard. Because those networks set and enforce interchange fees, the distinction could allow states to regulate elements of the payments system indirectly, the filing suggests, according to America’s Credit Unions.
The brief also challenges the lower court’s ruling on data use provisions, arguing the case lacked standing as a “pre-enforcement challenge” and should not have been decided on the merits.
America’s Credit Unions said it, along with the Illinois Credit Union League, is preparing a responsive brief due April 17.
As the CU Daily has been reporting, case is being closely watched by credit unions and other financial institutions as it could shape how states regulate interchange fees and payment data practices.
