ALEXANDRIA, Va.—The Defense Credit Union Council (DCUC) is urging NCUA to “follow the lead” of the OCC and weigh in on the interchange law lawsuit in Illinois.
The Illinois Interchange Fee Prohibition Act (IFPA), signed into law on June 7, would ban 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.
DCUC chief advocacy office Jason Stverak wrote to NCUA asking that it support the credit union industry in opposing the recently passed Illinois law.
“This law, which prohibits credit card companies from charging swipe fees on these transactions, has the potential to significantly disrupt credit unions’ operations and the financial ecosystem at large. We would strongly encourage the NCUA to consider the position taken by the Office of the Comptroller of the Currency, which has firmly opposed the law and recognized the broader, adverse implications it could have on the nation’s banking system,” Stverak wrote.
Largely Unworkable
The OCC, in its court filing, described the Illinois law as an “ill-conceived, highly unusual, and largely unworkable” piece of legislation that could fragment the regulatory environment for financial institutions.
“This fragmentation poses a risk not only to banks but also to credit unions, which play a crucial role in providing financial services to millions of Americans. The law threatens the established framework for interchange fees, which are vital to covering the costs of maintaining secure, reliable payment networks. Without these fees, the sustainability of services provided by credit unions could be jeopardized,” Stverak said.
Also, Stverak contended, the state-level attempt to regulate interchange fees “contradicts federal banking laws and could lead to a patchwork of inconsistent regulations across the country. Such a development would place undue compliance burdens on credit unions and restrict their ability to serve their members effectively. Like the OCC, we believe that federal preemption should be enforced to ensure uniformity in regulation of these fees.”
America’s Credit Unions and the Illinois Credit Union League have joined with the American Bankers Association in filing a complaint in the U.S. District Court for the Northern District of Illinois challenging the IFPA. The OCC has submitted an amicus brief supporting the suit.