The OCC today submitted an amicus brief supporting the American Bankers Association, the Illinois Bankers Association and others’ request for a preliminary injunction against an Illinois state law restricting interchange fees. In its brief, the OCC called the Illinois law — which bans card issuers and networks from receiving credit or debit interchange fees on tips and taxes — an “ill-conceived, highly unusual, and largely unworkable state law that threatens to fragment and disrupt this efficient and effective system.” The OCC added that the Illinois Interchange Fee Prohibition Act constitutes “unlawful interference” with the OCC’s congressionally granted powers to oversee national banks.
“Interchange fees play a vital role in enabling banks to protect against fraud, cover the costs of transaction processing, and provide other valuable consumer services,” the OCC said in its submission. “If the interchange fee prohibition provision in the IFPA is not invalidated, it will erode this essential infrastructure, leaving national banks with extraordinary operational burdens that likely will be passed on to consumers in the form of higher fees, reduced services, and weakened fraud protection. In addition to the misguided and unlawful restrictions on interchange fees, the IFPA’s imprudent data usage limitation will likewise weaken national banks’ and federal savings associations’ abilities to prevent fraud, manage risk, and provide critical services to consumers.”
The OCC argued that the National Bank Act preempts Illinois’ interchange fee restrictions because of national banks’ right to process debit and credit card transactions and because the IFPA would significantly interfere with national banks’ exercise of this power. The OCC also said the National Bank Act preempts the IFPA provision prohibiting banks from using or transferring payment-related data.
