Illinois interchange litigation
Illinois Bankers Association v. Raoul
Date: March 6, 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: ABA filed its opening brief in the Seventh Circuit appealing an Illinois Federal court decision that partially upheld the IFPA.
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 the NBA, HOLA , and Federal Credit Union Act (FCUA) preempt the IFPA. 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. 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.
However, Judge Kendall partially upheld the IFPA, ruling that federal law does not preempt the Interchange Fee Provision, but does preempt the Data Usage Limitation. The court therefore denied the ABA’s request for a permanent injunction as to the Interchange Fee Provision but granted a permanent injunction barring enforcement of the Data Usage Limitation. ABA and the Illinois AG both cross-appealed to the Seventh Circuit.
In its opening brief, ABA made three main arguments: the NBA, HOLA and FCUA preempt the Interchange Fee Provision; Riegle‑Neal and traditional equity analysis apply to the prohibition; and the Dormant Commerce Clause bars the Illinois AG from imposing the IFPA’s burdens on financial entities that other states charter while exempting those that Illinois charters.
Federal preemption (NBA, HOLA and FCUA)
ABA argued that the National Bank Act preempts the Interchange Fee Prohibition because national banks have federal authority to issue payment cards, process transactions, and receive compensation for those services. ABA explained that the IFPA prevents or significantly interferes with these powers by imposing substantial compliance costs, creating operational burdens, and restricting how banks collect fees, including by prohibiting interchange fees on certain transaction components and requiring credits to merchants. ABA emphasized that the law conflicts with established principles that allow national banks to charge and receive fees for authorized services and that it resembles a type of state law that federal law typically preempts. ABA also argued that the district court erred by focusing on card networks that set default interchange rates while ignoring that banks actively participate in determining rates and structuring network relationships. In addition, ABA asserted that the court improperly dismissed compliance burdens and operational disruptions, which are central to the significant interference analysis under Barnett Bank.
ABA further argued that HOLA and the FCUA also preempt the Interchange Fee Prohibition because both statutes grant federally chartered institutions powers comparable to those provided under the NBA and apply the same preemption standard. ABA explained that HOLA authorizes federal savings associations to perform core banking functions, including offering credit and debit card services, raising deposits, and charging fees, and that the IFPA interferes with those powers in the same way it burdens national banks. ABA also emphasized that federal credit unions operate as federal instrumentalities and may exercise their federally granted powers without state interference, including the authority to issue loans and payment cards and to earn income from those services. By restricting how these institutions structure and price their services, ABA argued that the IFPA prevents or significantly interferes with their core federally authorized functions and is therefore preempted under both HOLA and the FCUA.
Riegle-Neal Interstate Banking and Branching Efficiency Act
Additionally, ABA argued that the district court’s Riegle-Neal and equity analysis applies with full force to the Interchange Fee Prohibition. Riegle-Neal extends NBA preemption to out-of-state state banks by requiring states to treat them the same as national banks, ensuring competitive parity and extending preemption to non-Illinois state-chartered banks when national banks are protected. Moreover, equity requires courts to enjoin enforcement against payment system participants to the extent they facilitate federally protected institutions’ exercise of their powers. Because interchange fees flow through payment networks and other intermediaries, limiting relief to issuers alone would prevent those institutions from receiving the full benefit of preemption. ABA urged the Seventh Circuit to reverse the district court and grant injunctive relief to all relevant payment system participants to ensure that preemption operates effectively.
Dormant Commerce Clause
Finally, ABA argued that the Dormant Commerce Clause prohibits Illinois from imposing the IFPA’s burdens on financial entities chartered by other states but not on those it chartered. Illinois parity statutes extend federal preemption to Illinois-chartered financial institutions and shield them from the IFPA, while out-of-state institutions remain subject to its restrictions. ABA argued the Dormant Commerce Clause bars Illinois from granting that protection to in-state institutions while denying it to similarly situated out-of-state entities. This structure creates facially discriminatory treatment that advantages Illinois institutions and burdens interstate competitors. ABA therefore concluded that the statutory scheme violates the Dormant Commerce Clause.
OCC amicus briefs
After ABA filed its opening brief, the Office of the Comptroller of the Currency (OCC) submitted an amicus brief in support. The OCC advanced four main arguments: the district court applied the wrong legal standard when it assessed NBA preemption; the Interchange Fee Prohibition prevents or significantly interferes with national banks’ powers; the district court misread how the IFPA’s interchange fee prohibition applies to national banks; and the court correctly held that the NBA preempts the IFPA’s data usage limits. Former comptrollers and acting comptrollers of the currency also filed a separate amicus brief arguing that the district court erred by giving dispositive weight to which party sets interchange fees, rather than focusing on whether the IFPA prevents or significantly interferes with national bank powers.
Bottom Line: On appeal, ABA argues that federal law preempts the IFPA and that the statute is unlawful because it interferes with federally authorized banking powers and discriminates against out-of-state institutions in violation of the Dormant Commerce Clause.
Document: Brief
