CHICAGO — A federal judge has permanently barred Illinois from enforcing its restriction on interchange fees against federally chartered credit unions, extending protections previously granted to several types of banks and payment card networks.
The restriction, enacted as part of the Illinois Fee Prohibition Act, remains applicable to state-chartered credit unions when the law takes effect in mid-2027.
U.S. District Judge Virginia M. Kendall issued the ruling in Illinois Bankers Association et al. v. Raoul, a lawsuit brought by banking and credit union groups challenging the Illinois Interchange Fee Prohibition Act. The law prohibits collecting interchange fees on the sales tax and gratuity portions of credit and debit card transactions. Illinois has delayed its effective date to July 1, 2027.
The decision creates different treatment for credit unions based on their charters: Federal credit unions are protected by the injunction, while state-chartered credit unions remain subject to the fee restriction. It does not strike down the law in its entirety.
As the CU Daily reported, the latest ruling follows a June 2026 interim final rule from the National Credit Union Administration clarifying that federal credit unions’ authority to receive noninterest fees includes interchange fees set through payment networks. The agency said it issued the rule in part to avoid a disparity between federal credit unions and national banks.
‘Validates Unified Efforts’
“This ruling validates the unified efforts of the credit union industry by confirming that federal credit unions are exempted from the IFPA’s interchange fee prohibition,” America’s Credit Unions President and CEO Scott Simpson said. “This clarification stemmed from the NCUA’s interim final rule that brought parity for federal credit unions with other preempted financial institutions. Although this does protect some credit unions, America’s Credit Unions alongside our partners at the Illinois Credit Union League are continuing our legal challenge and other efforts to ensure that all credit unions are protected and their members can continue to enjoy a safe and reliable payments system.”
Added Jason Stverak, chief advocacy officer with the Defense Credit Union Council, “DCUC welcomes the court’s extension of preemption protections to federally chartered credit unions. Credit union members deserve the same certainty and protection as bank customers. But courtroom relief is not a substitute for repealing a fundamentally flawed law. The Illinois General Assembly should repeal the Interchange Fee Prohibition Act in full during its next legislative session. Military families, veterans, and working Americans deserve secure, reliable payments not costly mandates and uncertainty that threaten the affordable financial services they count on.”
Kendall’s earlier rulings had barred enforcement of the fee restriction against national banks, certain banks chartered outside Illinois, federal savings associations and payment card networks, but had left federal credit unions outside that protection. The case has also addressed a separate provision restricting use of payment transaction data.
