The American Bankers Association today joined other plaintiffs in filing a motion for summary judgment in a lawsuit challenging an Illinois law restricting interchange fees, pointing to the court’s previous finding that the plaintiffs were likely to succeed on their argument that federal law preempts the state law. The plaintiffs also submitted testimony from an expert witness detailing the interconnected payment card ecosystem and why it is important that participants in that system be treated equally under any court orders.
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. Last year, ABA, the Illinois Bankers Association and other groups challenged the law in U.S. District Court for the Northern District of Illinois. Among other things, they argued the law violates multiple federal statutes, including the National Bank Act and the Federal Credit Union Act.
Judge Virginia Kendall agreed that federal law likely preempted state law when it came to national banks and federal savings associations and issued a preliminary injunction against enforcement for those businesses. She later expanded the injunction to include out-of-state banks, and the plaintiffs are now asking her to further expand it to include all participants in the payment ecosystem. Noting Kendall’s past finding that the plaintiffs were likely to succeed because of federal preemption, they said the court should grant summary judgment and permanently prohibit the state from enforcing the law.
The plaintiffs also submitted testimony from Tony Hayes, founder of the consulting firm Banking and Payments Group, who detailed the complexities of the systems used to process payments and why those complexities make it hard to single out individual sectors for enforcement. “If one financial institution associated with a transaction has injunctive relief from the IFPA, then, by extension, all entities involved in the processing of the same transaction also need relief from the requirements of the IFPA, at least for purposes of that transaction,” he wrote.
