New court decision issued in Illinois IFPA case

The U.S. District Court for the Northern District of Illinois ruled Monday on the remanded challenge to the Illinois Interchange Fee Prohibition Act (IFPA), issuing a permanent injunction that includes banks, out-of-state state-chartered banks, federal savings associations, and payment networks. The district judge was responding to recent Office of the Comptroller of the Currency (OCC) interim final actions confirming federal preemption of the IFPA that do not apply to credit unions. The ruling does confirm preemption of the data-use provisions for federal credit unions. 

“This ruling was expected and stems from the OCC’s recent action that applies to banks, not credit unions. While it does not change the current status of credit unions under the IFPA, we remain encouraged by ongoing efforts to address the law’s significant operational challenges,” said America’s Credit Unions President/CEO Scott Simpson. “We are awaiting the NCUA’s rulemaking on preemption and will continue working with our partners at the Illinois Credit Union League to ensure credit unions receive the same clarity and protections afforded to other financial institutions in the payments system.”

America’s Credit Unions, the Illinois Credit Union League, American Bankers Association, and Illinois Bankers Association issued a joint statement:

“We welcome today’s ruling, which recognizes that federal law protects critical elements of the national payments system from conflicting state requirements. The court appropriately concluded that the Interchange Fee Prohibition Act cannot be applied to national banks, federal savings associations, payment networks as well as certain other financial services providers because it is preempted by federal law. The decision will spare millions of Illinois businesses and citizens from payment chaos.

“This decision is an important step toward preserving a consistent, nationwide framework for electronic payments. At the same time, it does not fully resolve the challenges created by this law. Even with this decision, credit unions and Illinois-chartered banks remain subject to IFPA, creating ongoing uncertainty and the risk of inconsistent treatment for parties in the same transaction. 

“Electronic payments rely on a highly interconnected network that requires a uniform national standard. We will continue working through the courts and with policymakers to ensure that all participants in the payments system are treated consistently, so the customers they serve will also be protected from the harm IFPA will cause. We look forward to the 7th Circuit's review of this misguided law.”

America’s Credit Unions and the Illinois Credit Union League (ICUL) filed the lawsuit claiming the IFPA’s prohibition on collecting interchange from tax/gratuity portions of a transaction illegally preempts federal law. 

The Illinois General Assembly approved a delay of the IFPA’s effective date of July 1, 2027 early Monday morning. Illinois Governor Pritzker must still sign the extension bill into law.