WASHINGTON — Nine merchant trade associations have filed two federal lawsuits challenging actions by banking and credit union regulators to shield federally chartered institutions from an Illinois law restricting interchange fees.
The lawsuits, filed in U.S. District Court for the District of Columbia, target actions by the Office of the Comptroller of the Currency and the National Credit Union Administration involving the Illinois Interchange Fee Prohibition Act.
As the CU Daily has been reporting, 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 also reported, in September, a court expanded an existing injunction against the law to include federally chartered credit unions. National banks, federal savings associations, out-of-state chartered banks and card networks had already received protection under the injunction. State-chartered banks and credit unions remain subject to the law. Estimates cited by the DigitalTransaction.Net indicate Illinois has about 235 state-chartered banks and nearly 200 state-chartered credit unions.
What Merchants are Contending
The merchant associations contend the federal agencies exceeded their authority. In a statement cited by Digital Transactions News, 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 lawsuit against the NCUA argues that the Federal Credit Union Act does not preempt the Illinois law and that the agency violated 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.
Credit Unions Respond
In response, the Defense Credit Union Council said the lawsuits threaten protections needed to provide payment services to service members and their families.
“These associations are asking the courts to dismantle protections that help credit unions serve the people who defend our country,” Jason Stverak, DCUC’s chief advocacy officer, said in a statement. “Cutting merchants’ payment costs does not make the cost of providing secure payment services disappear. It puts pressure on credit unions and the members who own them. Military families should not be asked to absorb that cost.”
DCUC said it upports the OCC’s preemption action and an NCUA rule clarifying federal credit unions’ authority over payment fees. The council said differing state requirements could increase compliance and processing costs, particularly for smaller institutions that rely on third-party payment networks and service providers.
“Fraud prevention and transaction processing do not stop at the sales tax or tip line on a receipt,” Stverak said. “Credit unions still have to support the entire purchase.”
Support for Consistency
DCUC further said it supports consistent rules are especially important for military households whose members frequently move between states or deploy overseas. It also pointed to a July 8 comment letter supporting the NCUA’s use of an interim final rule to address uncertainty for federal credit unions.
DCUC urged the agencies to defend their actions and called on the merchant groups to withdraw the lawsuits and work with credit unions on payment security and efficiency.
“Our members deserve reliable access to their money wherever military service takes them,” Stverak said.
