A federal judge today expanded a preliminary injunction against enforcement of an Illinois state law restricting interchange fees to include out-of-state banks — a decision coming after the court previously limited the injunction to national banks and federal savings associations. The injunction does not cover federal credit unions, which will still be required to comply with the law.
The Illinois Interchange Fee Prohibition Act, or IFPA, bans 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. The American Bankers Association, Illinois Bankers Association and other groups last year challenged the law in U.S. District Court for the Northern District of Illinois, arguing it violates multiple federal statutes, including the National Bank Act and the Federal Credit Union Act. The Office of the Comptroller of the Currency filed a rare amicus brief in support of the associations’ position.
Judge Virginia Kendall issued a preliminary injunction in December after agreeing that federal law likely preempted state law when it came to national banks and federal savings associations. The injunction was partial, however, because Kendall requested additional briefing on the court’s jurisdiction to enter a preliminary injunction for out-of-state state-chartered banks and federal credit unions.
In her decision, Kendall agreed that the federal Riegle-Neal Act likely preempts the IFPA and therefore expended the injunction to cover out-of-state state-chartered banks while the courts weigh the merits of the case. However, she was not convinced that the Federal Credit Union Act did the same for credit unions, so did not expand the injunction to cover those institutions.
The Riegle-Neal Act “is meant to ensure that out-of-state state banks can compete with nationally chartered banks,” Kendall wrote in her decision. “This means that because the court granted the preliminary injunction with respect to nationally chartered banks, forcing out-of-state state banks to comply with the IFPA would run afoul of” the federal law.
The co-plaintiffs informed the judge that they plan to pursue a motion for summary judgment in the case. Kendall scheduled a hearing for March 6.
