CHICAGO — America’s Credit Unions is awaiting a decision from U.S. District Judge Virginia Kendall that could determine not only the fate of Illinois’ interchange fee law, but also how aggressively other states pursue similar measures.
The case challenges the Illinois Interchange Fee Prohibition Act (IFPA), which would bar financial institutions from charging or receiving interchange fees on the tax or gratuity portion of card transactions. The law is currently delayed until July 1, 2026, following advocacy by credit unions and banking groups.
Ann Petros, vice president of policy engagement and credit union operations at America’s Credit Unions, said the trade group is closely monitoring Judge Kendall’s pending ruling after a recent hearing on cross-motions for summary judgment.
America’s Credit Unions is participating in the lawsuit alongside the Illinois Credit Union League, the American Bankers Association, and the Illinois Bankers Association. Petros said the group remains cautiously optimistic that the court could provide relief from compliance with the IFPA and extend federal preemption protections already applied to national banks to credit unions and other participants in the payments ecosystem.
A favorable decision that results in a permanent injunction for banks, credit unions, and card networks would send a strong signal to state legislatures that the IFPA model is legally flawed, Petros indicated. Such an outcome could slow or deter copycat legislation elsewhere by reinforcing the strength of federal preemption.
A mixed ruling, however—such as permanent relief for banks but not for credit unions or state-chartered institutions—could have the opposite effect. Petros warned that uneven relief would likely encourage states to continue advancing IFPA-style bills, increasing legislative activity around interchange restrictions nationwide.
That activity is already underway. Petros estimated that about two dozen states proposed some form of interchange fee prohibition last year, many modeled closely on Illinois’ law. South Carolina has pre-filed legislation targeting interchange fees on the sales-tax portion of transactions, while Vermont has introduced companion bills. Additional proposals are being monitored in states including Delaware and Mississippi.
Petros, too, noted a bill has been introduced in Indiana that is often referred to as the "Credit Card Chaos" bill. It limits the amount of interchange for charitable contributions, prohibits interchange on sales tax, and permits merchants to not honor all cards.
Petros said ACU will evaluate Judge Kendall’s decision once it is issued and determine next steps, which could include an appeal or renewed legislative efforts with state league partners. Regardless of the outcome, interchange is expected to remain a top policy issue as state legislative sessions ramp up across the country.