Recent actions by the Office of the Comptroller of the Currency make clear that federal law preempts an Illinois law restricting interchange fees, so a federal court should reverse its ruling finding otherwise, the American Bankers Association, Illinois Bankers Association and other plaintiffs said in a new legal filing.
The 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 challenged the state law in U.S. Federal Court for Northern Illinois, which upheld most of the law in a ruling earlier this year.
The Seventh Circuit U.S. Court of Appeals remanded the case back to the district court earlier this month after the OCC issued an interim final rule and interim final order. The interim final rule reaffirmed the longstanding powers of national banks to charge certain fees under federal law, and the interim final order confirmed that federal law preempts the IFPA. The appeals court directed the lower court to “address these matters, and any related issues, before this court attempts to do so.”
In their filing, the plaintiffs said the court’s earlier ruling relied on an OCC regulation concerning the ability of national banks to charge certain fees. The agency has since amended that regulation to expressly clarify that the NBA gives national banks that power.
“[T]he NBA preempts both provisions of the IFPA even without either OCC action,” they said. “But those actions make the outcome of this case inevitable. This court should apply the rule and order here and enter declaratory judgment that the NBA and [Home Owners Loan Act] preempt the interchange fee prohibition along with a corresponding permanent injunction.”
