CHICAGO–While credit unions have hailed a court decision involving the Illinois Fee Prohibition Act (IFPA), which applies to card interchange, there are still numerous questions that remain, including for non-Illinois state-chartered credit unions, as a July 1 deadline looms.
As the CU Daily has reported, the 7th Circuit Court has vacated the U.S. District Court for the Northern District of Illinois decision on the Illinois Interchange Prohibition Act, remanding the litigation back to the District Court for further proceedings.
The 7th Circuit instructed the district court to reconsider the case in light of the OCC’s April 29, 2026, interim final rule and order, which concluded that the IFPA conflicts with federal law and that national banks are not required to comply with it. The ruling vacates the Feb. 10 decision by Judge Virginia Kendall, which had largely upheld the state law, rejecting the argument that it was preempted by the National Bank Act.
America’s Credit Unions and the Illinois CU League are co-plaintiffs in litigation over the law, which would prohibit card issuers, networks, and processors from charging interchange fees on the tax and tip portions of electronic card transactions. It is scheduled to take effect July 1.
Joint Statement Issued
In response to the decision, the credit union trade groups joined with the Illinois Bankers Association and the American Bankers Association in issuing a joint statement that said, “In light of the Seventh Circuit’s order, we welcome the opportunity to resume our legal challenge to the Illinois Interchange Fee Prohibition Act in district court. As we have consistently argued, the Illinois Interchange Fee Prohibition Act conflicts with federal law, and recent regulatory actions only reaffirm that fact.
“The Office of the Comptroller of the Currency’s recent interim final actions directly address the core issues in this case and further strengthen our position that IFPA is preempted by federal law. With the law scheduled to take effect in Illinois on July 1, it is critically important for all parties to recognize the need for a timely resolution to provide certainty for consumers, businesses and financial institutions.
“Even better would be for the Illinois legislature to recognize that IFPA was a mistake and repeal this misguided law, sparing Illinois consumers and businesses from payment chaos and confusion,” the statement added.
Another ‘Bite of the Apple’
With the case now remanded back to Judge Kendall, Ann Petros, vice president of policy engagement and credit union operations with America’s Credit Unions, noted that the trade groups’ recent supplemental briefing argued that the federal preemption should also apply to federal credit unions.
“What that means is we get another bite at the apple,” Petros said. “We have an opportunity to continue the litigation before judge Kendall and potentially then appeal to the 7th Circuit again, depending on the decision from Judge Kendall, but this vacate order from the 7th Circuit vacates both the decision on the interchange provision pf the IFPA, as well as the data usage prohibition or the data usage limitations. If you recall, that was decided in our favor.”
With the July 1st effective date of the IFPA quickly approaching, Petros said the plaintiffs have filed a procedural motion requesting that the 7th Circuit issue a mandate to immediately send the case to the District Court to review, for which there is typically a 21-day waiting period, she said.
“But we are asking, given that the impending effective date, that the court send it along to Judge Kendall immediately for her evaluation,” Petros explained, adding the plaintiffs are considering all of their options, including working through Illinois lawmakers to either pause or potentially extend the effective date as the litigation is ongoing.
One Question That Remains
One question that remains is what of the compliance fate of out-of-state-chartered credit unions (Illinois has a wide card provision so the federal preemption applies to Illinois’ state-chartered CUs): Will those credit unions have to comply with the new interchange laws?
“We are still getting further arguments on the Dormant Commerce Clause, which is what applies to out of the state, state-chartered institutions,” Petros said in response to a question during a media call from the CU Daily. “We’re still arguing that this law unconstitutionally (violates) interstate commerce law and for that reason it should be preempted,” said Petros.
