Illinois ‘sovereign immunity’ assertion in interchange challenge would hurt state-chartered CUs
The Illinois Attorney General filed a brief in response to the challenge by America’s Credit Unions, the Illinois Credit Union League, and banking groups against the Illinois Interchange Fee Prohibition Act (IFPA), asserting “sovereign immunity,” among other things. This stance would exclude state-chartered financial institutions from receiving any relief should the credit-union sought preliminary injunction to halt the law be granted.
The IFPA would ban financial institutions from charging or receiving interchange fees in Illinois on tax or gratuity portions of debit or credit card transactions. Retailer groups, and Sen. Dick Durbin (D-Ill.) also filed various briefs and motions Friday.
“Having reviewed the state's latest filing, we remain confident in the strength of our case and our request for a preliminary injunction,” said spokespeople for the Illinois Credit Union League and Illinois Bankers Association. “If implementation of the Interchange Fee Prohibition Act is not paused, consumers and businesses in Illinois will face payment chaos, and our members will be irreparably harmed. The payment system called for by IFPA simply does not exist, and it will cost millions to try to comply with a measure the OCC told the court this week is an ‘ill-conceived, highly unusual, and largely unworkable state law that threatens to fragment and disrupt this efficient and effective system.’ We are surprised that the Illinois Attorney General is taking the position that even if federally chartered institutions get protection from the court, Illinois institutions should get no relief. That would create even more chaos and leave Illinois banks and credit unions out in the cold. We urge the attorney general to reconsider that position.”
The Office of the Comptroller of the Currency (OCC) last week filed an amicus brief in support of the challenge filed by America’s Credit Unions, the Illinois Credit Union League and others. The OCC’s brief urges the judge to stop the Illinois law because federal banking laws preempt the new state restrictions on interchange fees.
"Separately, it’s not surprising that some retail and merchant trade groups want to intervene in this case since they came up with this very bad idea in the first place. We will oppose their intervention because they have no legitimate grounds to join the state’s defense, and because they have already done enough damage to the Illinois economy. We’re also disappointed but not surprised that Sen. Durbin backs the law given his longstanding support for giveaways to corporate megastores. We would have hoped that the chairman of the Senate Judiciary Committee would recognize, as the OCC has, that this new state law is pre-empted under multiple federal laws, including his own Durbin Amendment and the National Bank Act signed into law by President Lincoln.
“We will respond to these latest filings as appropriate and look forward to the court's review," the groups added.
America’s Credit Unions’ advocacy team met with the NCUA to discuss concerns with the IFPA, which would take effect July 1, 2025. The organization will continue to advocate for it to be overturned to protect consumers, small businesses, and credit unions from its harmful impact.