Illinois Interchange Fee Prohibition Act
Illinois Bankers Association v. Kwame Raoul, in his official capacity as Illinois attorney general
Date: March 17, 2025
Issue: Should the district court grant the American Bankers Association’s motion for summary judgment and permanently enjoin enforcement of the Illinois Interchange Prohibition Act (IFPA)?
Case Summary: ABA and its co-plaintiffs (collectively ABA) moved for summary judgment, asking the court to enjoin enforcement of the IFPA permanently.
The IFPA, which is set to go into effect July 1, 2025, prohibits financial institutions from charging credit and debit card interchange fees on the portions of transactions tied to state and local taxes and tips. The law also restricts the sharing of certain data obtained in the transactions.
ABA sued Kwame Raoul in his official capacity as Illinois attorney general and moved for a preliminary injunction, arguing that the National Bank Act (NBA), Home Owners Loan Act (HOLA), and Federal Credit Union Act (FCUA) preempted the IFPA and that the IFPA conflicts with the Electronic Fund Transfer Act. On Dec. 20, 2024, Judge Kendall issued a partial preliminary injunction blocking enforcement against national banks and federal savings associations, ruling the ABA was likely to win on the merits of its NBA and HOLA preemption claims. However, the court denied relief to federal credit unions because the FCUA likely did not preempt the IFPA and Illinois-chartered institutions due to sovereign immunity. Judge Kendall later extended the injunction to out-of-state state-chartered banks but not to federal credit unions.
In its motion for summary judgment, ABA pointed to Judge Kendall’s prior ruling that the NBA and HOLA preempt the IFPA. As explained in the brief, the IFPA prevents or significantly interferes with national banks’ power to receive fees, process card transactions, receive deposits, and make loans through debit cards. Further, the IFPA’s data usage limitation interferes with banks’ ability to process data, process credit and debit card transactions, receive deposits, and issue loans. The brief also emphasized the Riegle-Neal Act preempts the IFPA for out-of-state state-chartered banks, and the dormant commerce clause protects these institutions from discriminatory laws like the IFPA.
ABA also maintained that Illinois cannot avoid federal protections for national banks and similar institutions by targeting their service providers. To preserve federal preemption, according to ABA, the IFPA cannot apply to card networks or other payment processors when they provide essential services for transactions involving national banks or other federally protected institutions. ABA emphasized that the NBA preempts IFPA’s application to services needed for national banks to carry out their federally authorized activities, even if third parties perform those services. ABA also stressed that equitable principles require a broad injunction to protect these institutions from IFPA’s restrictions fully.
Finally, ABA argued the EFTA preempts the IFPA’s regulation of debit card interchange fees. Regulation II limits debit card interchange fees to the sum of a fixed rate of “21 cents” and an ad valorem component of 0.05% “multiplied by the value of the transaction.” By setting a different standard, the IFPA disrupts this uniformity and conflicts with both Regulation II and the Durbin Amendment itself.
At bottom, ABA argued an injunction is necessary to prevent irreparable harm. It explained that IFPA-related revenue losses cannot be recovered due to sovereign immunity and the lack of a claim against anyone but the state. ABA also warned that enforcing the data usage limitation would harm its members, who cannot stop IFPA-covered transaction data from being used in key functions like fraud prevention, rewards programs, and credit decisions. Banks may need to build costly new systems to block such data use without an injunction. ABA added that the balance of equities and public interest favor permanent relief.
Bottom Line: The Illinois AG’s response is due April 23, 2025.
Documents: Motion
