The American Bankers Association today joined the Illinois Bankers Association, America’s Credit Unions and the Illinois Credit Union League in filing a complaint in the U.S. District Court for the Northern District of Illinois challenging the Illinois Interchange Fee Prohibition Act. The IFPA, which was signed into law on June 7, would ban banks, 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.
In the filing, ABA and the co-plaintiffs argue that if allowed to take effect, IFPA would throw the modern and efficient payment system into chaos and undermine the significant benefits that credit and debit cards provide to consumers and businesses. The filing outlines how the new state law violates multiple federal statutes including the National Bank Act and the Federal Credit Union Act and cannot be enforced against national or state-chartered banks, federal or state savings institutions, federal or state-chartered credit unions, nor their service providers. The plaintiffs will seek a preliminary injunction halting implementation of the new law while the court decides the merits of the case.
“We’re joining together in this legal challenge to protect Illinois consumers, small businesses and the financial institutions that serve them from the unprecedented chaos and confusion this new state law would create,” ABA President and CEO Rob Nichols said. “We also joined this lawsuit to strongly defend the dual banking system President Lincoln created in 1863 that has served our nation so well. The IFPA clearly violates the National Bank Act, which gives the federal government specific authority over national banks, as well as a long list of other federal laws designed to protect our financial system. We can’t let that stand.”
The IFPA is opposed by several Illinois business groups. It has also been criticized by the editorial boards of the Chicago Tribune and Crain’s Chicago Business. Similar laws have been debated in other states but never enacted.
“While we continue to encourage state lawmakers to reconsider the IFPA, we cannot take the chance that this misguided gift to corporate megastores takes effect and damages our state’s economy,” Illinois Bankers Association President and CEO Randy Hultgren said. “Left unchecked, the IFPA will wreak havoc at the register every time people use their credit or debit card in Illinois, creating confusion for consumers and higher costs for small businesses and banks in our state. This is why we are standing together with ABA and our credit union colleagues in this important fight.”
