If enforcement of an Illinois law restricting interchange fees is not prevented before July 1, it will upend the debit- and credit-card operations of federally chartered financial institutions and wreak havoc on the national payment-processing system, the American Bankers Association, Illinois Bankers Association and other plaintiffs told a federal appeals court today.
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. ABA and other groups have challenged the IFPA in federal court. However, earlier this year, a district court judge upheld most of the law, striking down only the portion pertaining to data sharing. The ban on fee collection is currently scheduled to take effect on July 1.
ABA and the other plaintiffs are asking the Seventh Circuit Court of Appeals to reverse the lower court decision and issue an injunction against enforcement of the law. In a new court filing, they warned of “staggering” compliance burdens for banks and other financial institutions if the law is allowed to take effect this summer.
Last month, the Office of the Comptroller of the Currency and a group of 10 former comptrollers warned in separate court filings that the IFPA threatens the national banking system by interfering with federal powers to regulate that system. Also, federal records show that the OCC submitted an interim final rule and a preemption determination on IFPA to the Office of Information and Regulatory Affairs. The interim final rule, titled “National Bank Non-Interest Charges and Fees,” appears to relate to national banks’ authority to charge and receive interchange fees under the National Bank Act, although the rule has not been made public.
