A federal court today expanded an injunction against enforcement of the Illinois Interchange Fee Prohibition Act to include federal credit unions, citing a recent National Credit Union Administration rule clarifying the powers of those institutions to charge certain fees.
The 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. In June, District Judge Virginia Kendall issued a permanent injunction preventing the law from being enforced against national banks, federal savings associations, out-of-state state-chartered banks protected by federal law, and payment card networks. She cited two interim measures issued by the Office of the Comptroller of the Currency asserting federal preemption over the IFPA and the longstanding powers of national banks to charge certain fees under federal law.
Kendall’s order did not cover federal credit unions and other institutions not subject to OCC supervision. However, the NCUA asserted federal preemption in a rule issued shortly after the court’s decision. Kendall reconsidered the plaintiffs’ request for a permanent injunction in light of the NCUA rule and expanded the injunction to cover federal credit unions.
The lawsuit against the IFPA was brought by the Illinois Bankers Association, American Bankers Association and other trade groups. In a joint statement, the groups welcomed the decision.
“The order means that only certain state-chartered institutions, and especially those chartered in Illinois, would be forced to comply with the misguided law when it takes effect next July,” the groups said. “In light of the court’s actions, state lawmakers should do the responsible thing and finally repeal IFPA in full and spare Illinois consumers and businesses from the payment chaos it would create.”
