The Office of the Comptroller of the Currency is urging a federal court to reverse its decision upholding Illinois restrictions on interchange fees in light of recent agency actions finding that federal law preempts the state law in question.
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. Earlier this year, the U.S. Federal Court for Northern Illinois upheld most of the IFPA in a lawsuit brought by the American Bankers Association and others. However, the Seventh Circuit U.S. Court of Appeals remanded the case back to the lower court after the OCC issued an interim final rule and interim final order reaffirming the longstanding powers of national banks to charge certain fees under federal law.
In its court filing, the OCC reiterated its view that the IFPA is an unworkable state law that threatens to upend the nation’s card payments system. The agency said that its interim final order has the force and effect of law “and, thus, will preempt the IFPA before it goes into effect independent of any judicial ruling.” It also said the court should find that the interchange fee prohibition prevents or significantly interferes with the national bank powers, as spelled out in the interim final rule.
“Accordingly, the court should rule that the IFPA is preempted as it applies to national banks,” the OCC said.
