SPRINGFIELD, Ill. — Illinois lawmakers have approved legislation delaying implementation of the state’s controversial Interchange Fee Prohibition Act (IFPA) for an additional year, pushing the effective date to July 1, 2027, as legal and regulatory battles over the law continue.
The measure, approved by both chambers of the Illinois General Assembly, marks the second delay for the first-in-the-nation law, which prohibits financial institutions, payment card networks and other entities from charging interchange fees on the tax and gratuity portions of debit and credit card transactions. The law had previously been scheduled to take effect July 1, 2026, after lawmakers approved a one-year extension in 2025.
As the CU Daily has been reporting, America’s Credit Unions and the Illinois Credit Union League have been working actively opposite to the legislation, including joining bank and payments groups as plaintiffs in a lawsuit over the law. The groups have also argued that a recent OCC ruling preempts the Illinois law for certain institutions, as the CU Daily reported here.
Supporters of the delay said additional time is needed as courts and federal regulators continue to weigh in on the legality and implementation of the measure. The law remains the subject of ongoing litigation brought by banking, credit union and payments industry groups, which argue the requirements are preempted by federal law and would create significant operational challenges for the nation’s payments system.
Lined up behind the law have been the nation’s powerful retail and merchant organizations.
What Law Would Do
The IFPA was enacted in 2024 and seeks to prevent card issuers and networks from collecting interchange fees on portions of transactions attributable to taxes and tips. Retailers have argued the measure would lower costs for merchants, while financial institutions have warned it could require extensive modifications to payment processing systems and potentially disrupt card transactions.
The extension comes as federal regulators and courts continue to reshape the legal landscape surrounding the statute.
In April, the Office of the Comptroller of the Currency issued an interim final order concluding that federal law preempts the IFPA for national banks and federal savings associations. The agency also issued a related rule affirming those institutions’ authority to charge and receive interchange fees.
More recently, the U.S. Court of Appeals for the Seventh Circuit vacated portions of a lower-court ruling involving the law and sent the case back to federal district court for further consideration in light of the OCC’s actions.
Opposing Views
Credit union organizations, banks and payments industry groups have welcomed the delays and federal preemption actions, arguing the law would create inconsistent rules across the payments ecosystem and increase compliance burdens. Retail groups have maintained that the statute would provide relief from interchange costs and contend that payment networks already possess the transaction data needed to comply with the law.
The latest legislative action means the IFPA will not take effect before July 1, 2027, unless additional legislative, regulatory or judicial action occurs before that date.
The vote in favor of the one-year delay was 111-0 in the Illinois House and 51-3 in the Senate.
Groups Welcome Decision
“The Illinois General Assembly’s extension of the Interchange Fee Prohibition Act’s effective date is a win for consumers and credit unions,” Scott Simpson, president/CEO of America’s Credit Unions, said in a statement. “However, ongoing litigation and the recent rules from the OCC and NCUA reinforce that more action is needed. Even with an extension, if the law takes effect, Illinois’ state-chartered credit unions and community banks will be at a disadvantage as federal institutions are preempted. As more states consider similar legislation that would introduce even more complexity and chaos into our payments system, this law must be undone.”
‘Reasonable Step’
“We welcome the Illinois General Assembly’s decision to once again delay the IFPA implementation deadline for another year. This reasonable step will protect Illinois businesses and consumers from facing payment chaos in just a month, without interrupting our ongoing legal challenge to IFPA. We remain confident in the strength of our case and look forward to securing permanent relief from this misguided law,” said America’s Credit Unions and the Illinois Credit Union League (ICUL), the American Bankers Association, and Illinois Bankers Association in a joint statement.
