CHICAGO—The American Bankers Association Monday joined other plaintiffs, including America’s Credit Unions, in filing a motion for summary judgment in a lawsuit challenging an Illinois law restricting interchange fees, pointing to the court’s previous finding that the plaintiffs were likely to succeed on their argument that federal law preempts the state law, the ABA Banking Journal reported.
The plaintiffs also submitted testimony from an expert witness detailing the interconnected payment card ecosystem and why it is important that participants in that system be treated equally under any court orders, the ABA Banking Journal said.
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. Last year, ABA, the Illinois Bankers Association, ACU and other groups challenged the law in U.S. District Court for the Northern District of Illinois. Among other things, they argued the law violates multiple federal statutes, including the National Bank Act and the Federal Credit Union Act.
Judge Virginia Kendall agreed that federal law likely preempted state law when it came to national banks and federal savings associations—but not credit unions—and issued a preliminary injunction against enforcement for those businesses. She later expanded the injunction to include out-of-state banks, and the plaintiffs are now asking her to further expand it to include all participants in the payment ecosystem. Noting Kendall’s past finding that the plaintiffs were likely to succeed because of federal preemption, they said the court should grant summary judgment and permanently prohibit the state from enforcing the law, ABA Banking Journal said.
The plaintiffs, according to the ABA Banking Journal, also submitted testimony from Tony Hayes, founder of the consulting firm Banking and Payments Group, who detailed the complexities of the systems used to process payments and why those complexities make it hard to single out individual sectors for enforcement. “If one financial institution associated with a transaction has injunctive relief from the IFPA, then, by extension, all entities involved in the processing of the same transaction also need relief from the requirements of the IFPA, at least for purposes of that transaction,” he wrote.
IFPA Interferes With Exercise of Federal Credit Union Act
America’s Credit Unions, the Illinois Credit Union League, and other banking organizations wrote in Monday’s filing that credit unions are federal instrumentalities, just like banks and savings associations, thus the IFPA interferes with the exercise of Federal Credit Union Act powers in the same way it does under the National Bank Act (NBA) and Home Owner’s Loan Act (HOLA). This conflict with the NBA and HOLA is why the court granted the preliminary injunction to banks and savings associations, ACU said.
“This is the next and important step in our path to strike down this law for credit unions. Should this law go into effect it would be impossible to comply with, and cause a complete paralyzation of how payments operate for all those who conduct business in Illinois," said Carrie Hunt, America's Credit Unions chief advocacy officer.