Judge rules federal preemption does not apply to interchange fees in Illinois lawsuit

A decision was issued Tuesday in the lawsuit brought against the Illinois Interchange Fee Prohibition Act (IFPA) by America's Credit Unions, the Illinois Credit Union League, the American Bankers Association, and the Illinois Bankers Association. The decision splits the federal preemption for financial institutions, granting it on the law's provisions related to data usage, while denying it on interchange fees.

“We are deeply disappointed by today’s ruling, and given the July 1 implementation date of the Illinois Fee Prohibition Act, we will appeal this decision," responded plaintiffs in a joint statement. "As the co-plaintiffs demonstrated and the OCC agreed, IFPA is clearly and fully preempted by federal law. The decision not to protect the payment system from this misguided state law is a serious error that will unleash chaos and confusion on Illinois consumers and businesses. We cannot let that stand.

“In light of this outcome, we renew our call for state lawmakers to repeal this flawed law before it can do any more harm to the Illinois economy. The fight over IFPA and any similar proposal will continue."

The IFPA would ban financial institutions, including credit unions, payment networks and other entities, from charging or receiving interchange fees in Illinois on the portion of a debit or credit card transaction attributable to tax or gratuity. 

The district court granted relief from the law to banks, savings associations, and out-of-state state-chartered banks in 2024. America’s Credit Unions, the Illinois Credit Union League, and other organizations filed an additional brief in January 2025 explaining why credit unions should also be granted relief.  

The appeal is expected to be filed imminently. America's Credit Unions will keep credit unions informed of developments and will continue its relentless advocacy to protect the payments system.