The National Credit Union Administration is issuing an interim final rule to clarify the powers of federal credit unions to charge certain fees, much like the Office of the Comptroller of the Currency recently did for national banks. Both are in response to an Illinois law restricting the collection of interchange fees.
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. However, a federal district court recently issued a permanent injunction against enforcement of most of the law after the OCC issued an interim final rule confirming the longstanding powers under federal law for national banks to charge certain fees, regardless of whether those fees are set by the bank or a third party. The OCC also released an interim final order asserting that federal law preempts the IFPA.
The court did not exempt federal credit unions from the interchange fee prohibition, as the OCC rule did not cover them. The NCUA rule is intended to preempt any state law affecting the non-interest charges and fees related to federal credit unions’ payment card services, including the IFPA.
In a joint statement, the American Bankers Association and other organizations that challenged the IFPA in court said the NCUA’s interim rule, along with the OCC’s actions, “provides important clarity that federal law governs these activities, which helps prevent a patchwork of conflicting state requirements that would create unnecessary disruption for consumers and the payments system.”
“The NCUA’s rule also strengthens the legal foundation in our ongoing litigation challenging IFPA and underscores that the law should not be implemented for any type of financial institution,” they added. “A definitive resolution to the case reaffirming federal preemption for all banks and credit unions, or the law’s repeal by the Illinois General Assembly, is critical to ensuring consistency, stability and continued confidence in the national payments system.”
