WASHINGTON — With the Trump administration moving to block enforcement of Illinois’ landmark swipe-fee law against national banks, the Defense Credit Union Council has asked NCUA for clarification on whether federal law also protects credit unions from Illinois’ new interchange restrictions.
DCUC is warning that the first-of-its-kind law could disrupt payments and increase costs for members.
In a letter to NCUA Chairman Kyle Hauptman, DCUC said guidance is urgently needed ahead of the July 1, 2026 effective date of the Illinois Interchange Fee Prohibition Act and similar state-level mandates. The group said the lack of clarity surrounding interchange fees, transaction data and payment operations creates operational and compliance challenges, particularly as other federal regulators, including the Office of the Comptroller of the Currency, have asserted federal preemption authority.
“Credit unions need clear, timely guidance to avoid a patchwork of state mandates that could disrupt payments and increase costs for military families,” DCUC Chief Advocacy Officer Jason Stverak wrote.
DCUC said the NCUA has authority under the Federal Credit Union Act to interpret and potentially preempt conflicting state laws. The organization urged the agency to move quickly, requesting a formal legal review, public guidance, interagency coordination and an update within 60 days.
OCC Submits Interim Final Rule
The Office of the Comptroller of the Currency (OCC), part of the Treasury Department, has submitted an “interim final rule” and is reviewing a potential executive order that would preempt the Illinois Interchange Fee Prohibition Act (IFPA) as it applies to national banks, according to reporting by Payments Dive and the Chicago Tribune.
As the CU Daily has been reporting, the Illinois law, passed in 2024 and scheduled to take effect July 1, 2026, would prohibit banks and card networks from charging interchange fees on the tax and tip portions of debit and credit card transactions. Interchange fees are typically paid by merchants to card-issuing banks and are often passed on to consumers in the form of higher prices.
Full Text Not Released
Federal officials have not yet released the full text of the proposed action, but the OCC’s filing indicates the administration is seeking to override the state law for nationally chartered banks while legal challenges continue, the Tribune noted.
As the CU Daily has also reported, the move follows a February ruling by a federal judge in Illinois that largely upheld the core of the law, allowing the state to ban interchange fees on taxes and gratuities, while striking down a separate provision related to data usage on federal preemption grounds. Banking and credit union trade groups have appealed that decision to the 7th U.S. Circuit Court of Appeals.
Industry groups representing banks have argued in court filings that the Illinois law interferes with federal authority over the national banking system, while state officials have countered that the measure does not directly regulate banks’ ability to set fees.
Retailers are Critical
Retail advocates criticized the federal effort, with the Illinois Retail Merchants Association calling it an attempt to “usurp” state law and favor financial institutions, according to the Chicago Tribune report.
