Illinois interchange litigation
Illinois Bankers Association v. Raoul
Date: Feb. 10, 2026
Issue: Whether federal law, including the National Bank Act (NBA), the Home Owners’ Loan Act (HOLA), and the Riegle-Neal Interstate Banking and Branching Efficiency Act, preempts the Illinois Interchange Fee Prohibition Act’s (IFPA) Interchange Fee Provision and Data Usage Limitation.
Case Summary: Judge Virginia Kendall of the Northern District of Illinois partially upheld the Illinois Interchange Fee Prohibition Act, ruling that federal law does not preempt the Interchange Fee Provision, but does preempt the Data Usage Limitation.
The IFPA prohibits financial institutions from charging credit and debit card interchange fees on the portions of transactions related to state and local taxes and tips. The law also restricts the sharing of certain data obtained in the transactions.
ABA and its co-plaintiffs (collectively ABA) sued Kwame Raoul in his official capacity as Illinois Attorney General (Illinois AG) and moved for a preliminary injunction, arguing that the 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 was unlikely to preempt the IFPA. The court also denied relief to Illinois-chartered institutions on sovereign-immunity grounds. Judge Kendall later extended the injunction to out-of-state state-chartered banks but not to federal credit unions.
On March 17, 2025, ABA moved for summary judgment, arguing the court should permanently enjoin enforcement because federal law preempts the IFPA. ABA explained the IFPA disrupts the national card payment system by restricting interchange fees and payment data practices authorized under the NBA, HOLA, FCUA, and the Durbin Amendment. On April 3, 2025, the Illinois AG cross-moved for summary judgment, repeating arguments that his office does not enforce the IFPA and that the NBA preempts state law only in cases of “extreme interference.” On May 7, 2025, ABA filed a reply brief, urging the court to extend full injunctive relief to other ecosystem participants that support those institutions in charging and receiving interchange fees.
Judge Kendall began by examining the justiciability of the ABA’s lawsuit and found that it had standing. The Illinois AG argued that the ABA failed to satisfy redressability because he lacked authority to enforce the IFPA. Judge Kendall rejected that argument, explaining that the Illinois AG’s common law enforcement powers and the likelihood that relief would reduce the risk of injury satisfy redressability. The court also rejected the Illinois AG’s claim that the Data Usage Limitation’s carve-out defeats standing, finding that the Illinois AG speculated about which data practices fall within the statutory exception. Applying Illinois rules of statutory interpretation, the court concluded the Illinois AG’s broad reading would render the Data Usage Limitation meaningless. Finally, the court held that the Ex Parte Young exception, which allows federal courts to issue injunctions against state officials despite sovereign immunity, applies here because the Illinois AG has enforcement authority under the IFPA.
Next, the court examined the merits of ABA’s lawsuit. Judge Kendall conceded this was “a close case” but ultimately concluded the IFPA’s Interchange Fee Provision is not preempted, while its Data Usage Limitation is preempted.
National Banks and Federal Savings Institutions
Declaring that the NBA does not preempt IFPA’s Interchange Fee Provision, the court denied ABA’s request for a permanent injunction on this provision. In Cantero, the U.S. Supreme Court directed courts to conduct a practical, comparative analysis of the nature and degree of interference. Put differently, courts must compare the challenged law to prior cases. If the interference resembles that of Franklin, Fidelity, First National Bank of San Jose, or Barnett Bank, then preemption applies. If it instead resembles Anderson, National Bank v. Commonwealth, or McClellan, then preemption does not apply.
Applying that framework, the court concluded that the IFPA’s Interchange Fee Provision does not significantly interfere with national banks’ powers. Judge Kendall rejected ABA’s argument based on what she called “the core snag” in its case, that third-party payment card networks such as VISA and Mastercard set and calculate interchange fees, not national banks. In her view, because banks “receive” interchange fees, but do not set them, she opined that IFPA does not directly regulate banks and thus does not trigger NBA preemption. The court distinguished the IFPA from the Cantero cases ABA relied on, noting that those decisions involved regulations that directly restricted banks’ ability to charge fees for their own services. By contrast, the court stressed that the IFPA regulates a network-based fee structure and applies to all financial entities, so it does not affect a customer’s decision to use a bank’s services. Although the IFPA imposes compliance costs and requires operational changes, in the court’s view, those burdens did not amount to significant interference found in Franklin, Fidelity, First National Bank of San Jose, or Barnett Bank.
Yet the court granted ABA a permanent injunction regarding the Data Usage Limitation and ruled that this provision of the IFPA conflicts with national banks’ federally authorized data-processing powers. The IFPA bars any entity other than the merchant from distributing or using transaction data, except to process payments or comply with legal requirements, and it allows enforcement under Illinois consumer protection law. The court determined this restriction significantly limits, and in some respects effectively eliminates, national banks’ express authority under federal regulations to engage in finance-related data processing, including fraud monitoring, dispute resolution, and loyalty programs.
Out-of-State Banks
Similarly, the court held that the NBA preempts the IFPA’s Data Usage Limitation as applied to out-of-state state banks, but it denied injunctive relief as to the Interchange Fee Provision. The court relied on 12 U.S.C. § 1831a(j)(1) of the Riegle–Neal Interstate Banking and Branching Efficiency Act, which requires host states to treat out-of-state state banks the same as out-of-state national banks. The statute protects competitive equality between state-chartered and nationally chartered banks operating across state lines. Because the court had already determined that the NBA preempts the Data Usage Limitation with respect to national banks, it concluded that § 1831a(j)(1) extends that same preemption to out-of-state state banks. However, as with national banks, the court denied ABA’s request for an injunction as to the IFPA’s Interchange Fee Provision.
Federal Credit Unions
The court also ruled that the FCUA preempts the Data Usage Limitation but does not preempt the Interchange Fee Provision as applied to federal credit unions. The court rejected ABA’s argument that the Barnett Bank standard automatically governs FCUA preemption, explaining that Congress did not extend the NBA’s express preemption framework to federal credit unions and that no court has adopted that approach. The court reaffirmed its earlier ruling that the IFPA’s Interchange Fee Provision does not intrude on federal credit union powers enough to trigger preemption. Still, the court reached a different conclusion for the Data Usage Limitation. It found that this provision meaningfully restricts federal credit unions’ authorized electronic financial services, including data processing, fraud detection, and rewards programs, thereby creating an obstacle to Congress’s objectives.
Debit Card Transactions
The court denied an injunction against the IFPA as applied to debit card transactions. At the preliminary injunction stage, the court determined that no conflict exists between the Durbin Amendment and the Interchange Fee Prohibition because the federal regulation sets only a maximum permissible interchange fee. The court acknowledged that the ABA maintains the same argument that the amendment establishes a fixed standard that conflicts with the IFPA, but it found no reason to revisit its earlier analysis and adhered to its prior ruling.
Dormant Commerce Clause
The court rejected ABA’s claim that Illinois’ wildcard statutes, when read together with the IFPA, violate the Dormant Commerce Clause by exempting in-state financial institutions while leaving certain out-of-state state-chartered institutions subject to the Data Usage Limitation. The court explained that wildcard statutes place Illinois institutions on equal footing with their federal counterparts and do not discriminate against or burden interstate commerce in a protectionist way. Although the interaction between the wildcard statutes and the IFPA may result in some out-of-state institutions remaining subject to the law, the court found no clear constitutional violation under established Dormant Commerce Clause precedent.
Card Networks
With respect to the Data Usage Limitation, the court ruled that federal preemption extends to card networks and other payment system participants only as needed to provide complete relief for preempted federal institutions. ABA argued that the IFPA could not apply to these entities at all and that Dodd-Frank’s carveout preserving state-law applicability to a national bank’s subsidiaries, affiliates, and agents was inapplicable because card networks are independent service providers, not subsidiaries, affiliates, or agents of national banks. The court disagreed, emphasizing that Congress did not grant automatic preemptive protection to such entities. Because the Data Usage Limitation directly implicates federally protected banking powers, the court applied equitable principles to shield card networks and similar participants when they facilitate those powers. However, the court made clear that the IFPA remains enforceable against those entities in their independent capacity outside the scope of federally protected banking activity.
Bottom Line: ABA and its co-plaintiffs issued the following statement: “We are deeply disappointed by today’s ruling and given the July 1 implementation date of the Illinois Interchange Fee Prohibition Act, we will appeal this decision. As the co-plaintiffs demonstrated and the OCC agreed, IFPA is clearly and fully preempted by federal law. The decision not to protect the payment system from this misguided state law is a serious error that will unleash chaos and confusion on Illinois consumers and businesses. We cannot let that stand.”
On Feb. 13, 2026, ABA filed its appeal in the Seventh Circuit.
Document: Opinion
