Illinois interchange litigation
Illinois Bankers Association v. Raoul
Date: April 17, 2026
Issue: Whether federal law, including the National Bank Act (NBA), the Home Owners’ Loan Act (HOLA), the Federal Credit Union Act (FCUA), 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 a response brief to the Illinois Attorney General Kwame Raoul’s combined opening and reply brief in its appeal of 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 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. 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. Still, 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 thus 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.
On March 6, 2026, ABA filed its opening brief and advanced three main arguments: the NBA, HOLA, and FCUA preempt the Interchange Fee Provision; Riegle-Neal and traditional equity principles govern the prohibition; and the Dormant Commerce Clause bars the Illinois Attorney General from imposing the IFPA’s burdens on out-of-state financial institutions while exempting those chartered in Illinois. The Office of the Comptroller of the Currency and a group of former comptrollers also filed amicus briefs in support. On April 3, 2026, the Illinois AG filed a response brief, arguing that the district court correctly found no preemption as to national banks and federal savings associations, and further argued that the court should still uphold the judgment as applied to federal credit unions, even if the NBA preempts the provision.
In its reply brief, ABA provided two main counterarguments: Federal law, including the NBA, HOLA, and FCUA, invalidates the interchange fee prohibition and its enforcement should be enjoined; and the district court’s injunction against the Data Usage Limitation should be affirmed.
Federal preemption (NBA, HOLA and FCUA)
ABA argued the NBA preempts the Interchange Fee Provision because it significantly interferes with national banks’ powers. It rejected the Illinois AG’s “effective prohibition” standard, emphasizing that Barnett Bank v. Nelson and Cantero v. Bank of America require a practical inquiry into significant interference. ABA maintained that the Provision imposes substantial compliance costs, operational burdens, and system changes that disrupt card issuance, transaction processing, and fee generation. It also rejected the claim that banks lose federal powers when using third parties, noting federal law permits such arrangements. Further, ABA argued that restricting interchange compensation itself constitutes significant interference and that the Provision’s aggregate financial impact is substantial.
ABA similarly argued that HOLA and the FCUA preempt the Provision under the same “prevents or significantly interferes” standard.
Dormant Commerce Clause
ABA argued the Dormant Commerce Clause bars Illinois from imposing IFPA burdens on out-of-state institutions while exempting in-state ones. It contended the IFPA and Illinois parity statutes operate together to discriminate against out-of-state, state-chartered institutions. ABA urged the court to reject the Illinois AG’s argument that any disparity stems from federal law, explaining that the discrimination results from Illinois’s choice to exempt its own institutions.
Riegle-Neal
ABA argued the Riegle-Neal Interstate Banking and Branching Efficiency Act extends NBA preemption to out-of-state state-chartered banks by ensuring parity with national banks. ABA urges the court to reject the Illinois AG’s narrower, branch-limited reading as unsupported by the statute or case law and inconsistent with its purpose. ABA emphasized that courts treat Riegle-Neal as a parity provision and warned that the Illinois AG’s interpretation would invert the statute by allowing greater regulation of out-of-state banks.
Card Networks
ABA argued that equitable relief must extend to payment-system participants, such as card networks, to ensure full protection for federally protected institutions. It emphasized that without such relief, banks cannot fully receive interchange fees. Dismissing the Illinois AG’s claim that preemption is limited to financial institutions, ABA explained the IFPA does not constrain courts’ equitable powers.
Data Usage Limitation
ABA argued that the injunction against the Data Usage Limitation should be affirmed. It noted that the Illinois AG did not challenge the preemption ruling and relied only on standing and statutory interpretation.
Bottom Line: On April 26, 2026, the OCC issued an interim final rule and interim final order regarding the IFPA. The rule confirms that federal law allows national banks to charge certain fees, regardless of whether the bank or a third party sets them. The order confirms that federal law preempts the IFPA, expressly providing that national banks and federal thrifts are neither subject to nor required to comply with this state law. Oral arguments are set for May 13, 2026.
Document: Brief
