The Illinois General Assembly late Saturday approved legislation extending by a year the effective date of a first-of-its-kind state law restricting interchange fees.
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 law was adopted last year and was scheduled to take effect on July 1 of this year. Illinois lawmakers this weekend voted to extend that deadline to July 1, 2026, amid an ongoing legal fight over the law led by the American Bankers Association. The Illinois governor has up to 60 days to act on the measure after it is transmitted to him by the legislature.
ABA, Illinois Bankers Association and other groups last year challenged the law in U.S. District Court for the Northern District of Illinois. Among other things, they argued IFPA violates multiple federal statutes, and the Office of the Comptroller of the Currency filed a rare amicus brief outlining its own concerns with the state law and its infringement of federal preemption. The court granted a preliminary injunction barring enforcement of the law for national banks and federal savings associations, finding that federal law likely preempts the state law. That injunction was later extended to out-of-state, state-chartered banks, but Illinois chartered banks, credit unions operating in the state and payment networks would be required to comply on July 1 of this year if the implementation date is not delayed. The litigation is ongoing and in a recent motion for summary judgment, ABA and the other co-plaintiffs argued that the law should be blocked for all participants in the payments system.
In a statement, IBA Executive Vice President Ben Jackson thanked Illinois lawmakers for extending the law’s effective date but said the best course of action would be to fully repeal the statute.
“This law will cause widespread economic disruption, and mounting evidence shows that the measure overwhelmingly benefits corporate megastores while placing an undue financial burden on small businesses and smaller financial institutions that form the backbone of our local economies,” Jackson said.
A ruling in the court case could come later this year.
